10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended June 30, 2004
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to

Commission File No. 000-29089

Antigenics Inc.

(Exact name of Registrant as Specified in its Charter)

Delaware	06-1562417
(State of Incorporation)	(I.R.S. Employer Identification Number)

630 Fifth Avenue, Suite 2100, New York, New York, 10111

(Address of Principal Executive Offices)

(212) 994-8200

(Registrant’s Telephone Number, including Area Code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

      Number of shares outstanding of the registrant’s Common Stock as of August 2, 2004: 45,471,679 shares

ANTIGENICS INC.

Quarterly Period Ended June 30, 2004

TABLE OF CONTENTS

			Page
PART I  —  FINANCIAL INFORMATION
Item 1	—	Unaudited Consolidated Financial Statements:
		Consolidated Balance Sheets (unaudited) as of June 30, 2004 and December 31, 2003		2
		Consolidated Statements of Operations (unaudited) for the Three and Six Months ended June 30, 2004 and 2003		3
		Consolidated Statements of Cash Flows (unaudited) for the Six Months ended June 30, 2004 and 2003		4
		Notes To Unaudited Consolidated Financial Statements		5
Item 2	—	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3	—	Quantitative and Qualitative Disclosures About Market Risk		30
Item 4	—	Controls and Procedures		31
PART II —  OTHER INFORMATION
Item 1	—	Legal Proceedings		31
Item 4	—	Submission of Matters to a Vote of Security Holders		32
Item 6(a)	—	Exhibits		33
Item 6(b)	—	Current Reports on Form 8-K		33
Signatures				34
EX-10.1 EMPLOYMENT AGREEMENT PETER THORNTON
EX-31.1 SECT. 302 C.E.O. CERTIFICATION
EX-32.1 SECT. 906 C.E.O. CERTIFICATION

1

PART I — FINANCIAL INFORMATION

Item 1 — Unaudited Consolidated Financial Statements

ANTIGENICS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

		June 30, 2004			December 31, 2003
ASSETS
Cash and cash equivalents		$	48,354,569		$	57,211,895
Short-term investments			69,128,527			32,266,347
Accounts receivable			520			589,698
Inventories			209,441			871,256
Prepaid expenses			2,285,581			1,899,558
Deferred offering costs			—			110,934
Restricted cash			2,578,858			—
Other current assets			5,022,838			372,296
	Total current assets		127,580,334			93,321,984
Plant and equipment, net of accumulated amortization and depreciation of $8,911,292 and $15,623,017 at June 30, 2004 and December 31, 2003, respectively			24,080,536			25,032,838
Goodwill			3,081,703			3,081,703
Core and developed technology, net of accumulated amortization of $3,662,600 and $3,107,907 at June 30, 2004 and December 31, 2003, respectively			7,409,973			7,964,666
Restricted cash			3,703,811			8,521,049
Other long-term assets			1,973,621			2,157,295
Total assets		$	167,829,978		$	140,079,535
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	1,039,679		$	3,179,567
Accrued liabilities			12,069,527			11,302,367
Other current liabilities			103,888			2,000,000
Current portion, long-term debt			5,303,779			5,622,736
	Total current liabilities		18,516,873			22,104,670
Long-term debt, less current portion			7,407,622			10,244,796
Other long-term liabilities			2,720,000			2,484,317
Commitments and contingencies
Stockholders’ Equity
Preferred stock, par value $0.01 per share; 25,000,000 shares authorized; Series A convertible preferred stock, par value $0.01 per share; 31,620 shares designated, issued and outstanding at June 30, 2004 and December 31, 2003, respectively; liquidation value of $31,817,625 at June 30, 2004			316			316
Common stock, par value $0.01 per share; 100,000,000 shares authorized; 45,087,553 and 39,522,699 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively			450,874			395,226
Additional paid-in-capital			438,963,089			384,457,557
Deferred compensation			(49,232	)		(72,081	)
Accumulated other comprehensive (loss) income			(242,670	)		162,802
Accumulated deficit			(299,936,894	)		(279,698,068	)
	Total stockholders’ equity		139,185,483			105,245,752
Total liabilities and stockholders’ equity		$	167,829,978		$	140,079,535

See accompanying notes to unaudited consolidated financial statements.

2

ANTIGENICS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2004 and 2003

			Three Months Ended June 30,						Six Months Ended June 30,
			2004			2003			2004			2003
			(Unaudited)
Revenue			$	186,744		$	33,334		$	296,259		$	928,468
Operating expenses:
	Research and development			(10,879,171	)		(11,757,481	)		(21,824,713	)		(21,878,370	)
	General and administrative			(6,576,164	)		(5,351,330	)		(12,121,488	)		(9,954,348	)
		Operating loss		(17,268,591	)		(17,075,477	)		(33,649,942	)		(30,904,250	)
Other income (expense):
	Non-operating income			5,555			—			5,555			—
	Interest income			357,233			321,724			661,134			667,610
	Interest expense			(137,823	)		(3,771	)		(289,973	)		(16,469	)
		Loss from continuing operations		(17,043,626	)		(16,757,524	)		(33,273,226	)		(30,253,109	)
Income from discontinued operations, net of tax of $171,982 (including gain on disposal of $14.0 million in 2004)				13,960,046			138,904			13,034,400			142,728
		Net loss		(3,083,580	)		(16,618,620	)		(20,238,826	)		(30,110,381	)
Dividends on Series A convertible preferred stock				(197,625	)		—			(395,250	)		—
		Net loss attributable to common stockholders	$	(3,281,205	)	$	(16,618,620	)	$	(20,634,076	)	$	(30,110,381	)
Per common share data, basic and diluted:
		Loss from continuing operations	$	(0.38	)	$	(0.43	)	$	(0.77	)	$	(0.79	)
		Income from discontinued operations, net of tax	$	0.31		$	0.00		$	0.30		$	0.00
		Net loss attributable to common stockholders	$	(0.07	)	$	(0.42	)	$	(0.47	)	$	(0.78	)
Weighted average number of common shares outstanding, basic and diluted				45,067,535			39,385,325			43,922,820			38,484,836

See accompanying notes to unaudited consolidated financial statements.

3

ANTIGENICS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2004 and 2003

			June 30,
			2004			2003
			(Unaudited)
Cash flows from operating activities:
	Net loss		$	(20,238,826	)	$	(30,110,381	)
	(Loss) Income from discontinued operations			(925,646	)		142,728
	Gain on disposal of discontinued operations			13,960,046			—
	Loss from continuing operations			(33,273,226	)		(30,253,109	)
	Adjustments to reconcile to net cash used in operating activities:
		Depreciation and amortization		2,533,281			2,412,944
		Write-down of investments		—			116,705
		Non-cash stock compensation		696,763			693,858
		Effect of accounting for asset retirement obligations		—			282,148
		Loss on sale of fixed assets		4,399			—
	Changes in operating assets and liabilities:
		Accounts receivable		—			410,643
		Inventories		—			133,090
		Prepaid assets		(386,023	)		(170,302	)
		Accounts payable		(2,134,888	)		(443,657	)
		Accrued expenses and other current liabilities		740,366			1,775,284
		Other operating assets and liabilities		28,816			455,790
	Net cash used in continuing operations			(31,790,512	)		(24,586,606	)
	Net cash provided by discontinued operations			108,159			370,919
	Net cash used in operating activities			(31,682,353	)		(24,215,687	)
Cash flows from investing activities:
	Proceeds from maturities of available for sale securities			23,568,528			32,506,860
	Purchases of available for sale securities			(60,836,180	)		(31,620,641	)
	Investment in AGTC			—			(300,000	)
	Purchases of plant and equipment			(1,271,267	)		(10,691,339	)
	Proceeds from sale of property and equipment			8,000			—
	Proceeds from divestiture of assets			8,302,011			—
	Reduction in restricted cash			2,238,380			—
	Net cash used in investing activities			(27,990,528	)		(10,105,120	)
Cash flows from financing activities:
	Net proceeds from sale of equity			53,631,418			59,596,618
	Proceeds from exercise of stock options			655,987			801,669
	Proceeds from employee stock purchase plan			106,046			140,281
	Payments of series A convertible preferred stock dividend			(421,765	)		—
	Payments of long-term debt			(3,156,131	)		(326,373	)
	Net cash provided by financing activities			50,815,555			60,212,195
Net (decrease) increase in cash and cash equivalents				(8,857,326	)		25,891,388
Cash and cash equivalents, beginning of period				57,211,895			33,130,176
Cash and cash equivalents, end of period			$	48,354,569		$	59,021,564
Supplemental cash flow information:
	Cash paid for interest		$	338,291		$	13,544
Non-cash investing and financing activities:
	Effect of adoption of Statement of Financial Accounting Standards No. 143:
		Plant and equipment	$	—		$	532,324
		Asset retirement obligation	$	—		$	814,472
Receivable from divestiture of assets			$	4,250,000		$	—

See accompanying notes to unaudited consolidated financial statements.

4

ANTIGENICS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

Note A — Basis of Presentation

      The accompanying unaudited consolidated financial statements of Antigenics Inc. and subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 10 of Regulation S-X and include the accounts of Antigenics Inc. and its wholly-owned subsidiaries. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All significant intercompany balances have been eliminated in consolidation. Certain amounts in the prior year unaudited consolidated financial statements have been reclassified to conform to the current year presentation. Operating results for the six-month period ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2003 included in our annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 15, 2004.

Note B — Equity Offerings

      On February 6, 2004, we sold 5,000,000 shares of our common stock, $0.01 par value, and we received net proceeds of approximately $50 million.

      On February 18, 2004, we sold an additional 400,000 shares of our common stock, $0.01 par value, and we received net proceeds of approximately $4 million.

Note C — Net Loss Per Share

      Basic earnings or loss per common share (“EPS”) is calculated by dividing the applicable earnings or loss by the weighted average number of common shares outstanding. Diluted EPS is calculated by dividing the applicable earnings or loss by the weighted average common shares outstanding plus the dilutive effect of outstanding stock options, stock warrants and the Series A Convertible Preferred Stock. Because we have reported a loss from continuing operations for all periods, diluted earnings or loss per common share is the same as basic earnings or loss per common share as the effect of including the outstanding stock options, stock warrants and the convertible preferred stock in the calculation would have reduced the loss from continuing operations per common share. Therefore, outstanding stock options, stock warrants and the issued shares of Series A convertible preferred stock are not included in the calculation, and basic and diluted earnings or loss per common share are equal.

Note D — Inventories

      Inventories consist of approximately the following at:

		June 30, 2004		December 31, 2003
Finished goods		$	209,000	$	765,000
Work-in-process			—		17,000
Raw materials			—		89,000
	Total inventories	$	209,000	$	871,000

5

ANTIGENICS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note E — Stock-Based Compensation

      We account for options granted to employees and directors in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense is recorded on fixed stock option grants only if the current fair value of the underlying stock exceeds the exercise price of the option at the date of grant and it is recognized on a straight-line basis over the vesting period.

      We account for stock options granted to non-employees on a fair-value basis in accordance with Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation and Emerging Issues Task Force Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. As a result, any non-cash charge to operations for non-employee options with vesting or other performance criteria is affected each reporting period by changes in the market price value of our common stock.

      In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of SFAS No. 123. This Statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair-value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements, which interim disclosures are included below.

      The following table illustrates the effect on net loss attributable to common stockholders and net loss attributable to common stockholders per common share, basic and diluted, had compensation cost for options granted to employees and directors and sold through our employee stock purchase plan been determined consistent with the fair value method of SFAS No. 123:

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Net loss attributable to common stockholders, as reported	$	(3,281,000	)	$	(16,619,000	)	$	(20,634,000	)	$	(30,110,000	)
Add: stock-based employee and director compensation recognized under APB Opinion No. 25		393,000			17,000			440,000			77,000
Deduct: total stock-based employee and director compensation expense determined under fair-value based method for all awards		(1,822,000	)		(1,159,000	)		(3,313,000	)		(2,138,000	)
Pro forma net loss attributable to common stockholders	$	(4,710,000	)	$	(17,761,000	)	$	(23,507,000	)	$	(32,171,000	)
Net loss attributable to common stockholders per common share, basic and diluted:
As reported	$	(0.07	)	$	(0.42	)	$	(0.47	)	$	(0.78	)
Pro forma	$	(0.10	)	$	(0.45	)	$	(0.54	)	$	(0.84	)

      The effects of applying SFAS No. 123, for either recognizing or disclosing compensation costs under such pronouncement, may not be representative of the effects on reported net income or loss for future

6

ANTIGENICS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

years. The fair value of each option and employee stock purchase right granted is estimated on the date of grant using an option-pricing model with the following weighted average assumptions:

	2004			2003
Estimated volatility		67	%		63	%
Expected life in years — employee and director options		6			6
Expected life in years — employee stock purchase rights		1			1
Risk-free interest rate		1.31	%		1.22	%
Dividend yield		0	%		0	%

      The expected life used to estimate the fair value of non-employee options is equal to the contractual life of the option granted.

      Effective May 26, 2004, our stockholders approved an amendment to our 1999 Equity Incentive Plan increasing the number of shares of our Common Stock available under the plan from 6,000,000 to 10,000,000 shares.

Note F — Comprehensive Loss

      The following table provides the calculation of other comprehensive loss for the three and six months ended June 30, 2004 and 2003:

			Three Months Ended June 30,						Six Months Ended June 30,
			2004			2003			2004			2003
Net loss attributable to common stockholders			$	(3,281,000	)	$	(16,619,000	)	$	(20,634,000	)	$	(30,110,000	)
Other comprehensive income (loss):
	Unrealized (loss) gain on marketable securities, net			(244,000	)		231,000			(405,000	)		166,000
		Other comprehensive loss	$	(3,525,000	)	$	(16,388,000	)	$	(21,039,000	)	$	(29,944,000	)

Note G — Commitments and Contingencies

      On May 18, 2000, we committed $3,000,000 to become a limited partner in a limited partnership, called Applied Genomic Technology Capital Fund (AGTC), which invests principally in companies that apply genomic technologies and information in their offerings of products and services or that are engaged in research and development involving genomic technologies. Capital contributions to the limited partnership are made as authorized by the general partner. As of June 30, 2004, we have invested $1,875,000, and have included this amount, net of impairment charges, in non-current other assets. This investment is accounted for under the cost method as our ownership is approximately 2%. In order to assess whether or not there has been an other than temporary decline in the value of this investment, we analyze several factors including: (1) the carrying value of the limited partnership’s investments in its portfolio companies, (2) how recently investments in the portfolio companies have been made, (3) the post-financing valuations of those investments, (4) the level of un-invested capital held by the limited partnership and (5) the overall trend in venture capital valuations. Based on these analyses, for the six months ended June 30, 2004, we concluded that an other than temporary decline had not occurred. Our investment balance aggregated $1,557,000 at June 30, 2004. The general partner of AGTC is AGTC Partners, L.P. and NewcoGen Group Inc. is the general partner of AGTC Partners, L.P. Noubar Afeyan, Ph.D., who is one of our directors, is the Senior Managing Director and CEO of Flagship

7

ANTIGENICS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Ventures, a partnership of funds including NewcoGen Group Inc. and AGTC. In addition, Garo H. Armen, Ph.D., our chairman and chief executive officer, is a director of NewcoGen Group Inc.

      Antigenics, our Chairman and Chief Executive Officer Garo Armen, and two investment banking firms that served as underwriters in our initial public offering have been named as defendants in a civil class action lawsuit filed on November 5, 2001 in the Federal District Court for the Southern District of New York on behalf of a class of purchasers of our stock between February 3, 2000 and December 6, 2000. Similar complaints were filed against about 300 other issuers, their underwriters, and in many instances their directors and officers. These cases have been coordinated under the caption In re Initial Public Offering Securities Litigation, Civ. No. 21 MC 92 (SAS), by order dated August 9, 2001. The suit against Antigenics and Dr. Armen alleges that the brokerage arms of the investment banking firms charged secret excessive commissions to certain of their customers in return for allocations of our stock in the offering. The suit also alleges that shares of our stock were allocated to certain of the investment banking firms’ customers based upon agreements by such customers to purchase additional shares of our stock in the secondary market. The complaint alleges that Antigenics is liable under Section 11 of the Securities Act of 1933, as amended (the Securities Act), and Dr. Armen is liable under Sections 11 and 15 of the Securities Act because our registration statement did not disclose these alleged practices. On April 19, 2002, the plaintiffs in this action filed an amended class action complaint, which contains new allegations. Similar amended complaints were filed with respect to about 300 other companies. In addition to the claims in the earlier complaint, the amended complaint alleges that Antigenics and Dr. Armen violated Sections 10(b) and 20 of the Securities Exchange Act and SEC Rule 10b-5 by making false and misleading statements and/or omissions in order to inflate our stock price and conceal the investment banking firms’ alleged secret arrangements. The claims against Dr. Armen, in his individual capacity, have been dismissed without prejudice. On July 15, 2002, Antigenics and Dr. Armen joined the Issuer Defendants’ Motion to Dismiss the Consolidated Amended Complaints. By order of the Court, this motion set forth all “common issues,” i.e., all grounds for dismissal common to all or a significant number of Issuer Defendants. The hearing on the Issuer Defendant’s Motion to Dismiss and the other Defendants’ motions to Dismiss was held on November 1, 2002. On February 19, 2003, the Court issued its opinion and order on the Issuer Defendants’ Motion to Dismiss. The Court granted Antigenics’ motion to dismiss the Rule 10b-5 and Section 20 claims with leave to amend and denied our motion to dismiss the Section 11 and Section 15 claims. On June 14, 2004, papers formalizing a proposed settlement among the plaintiffs, issuer defendants, and issuers were presented to the Federal District Court for the Southern District of New York, and Antigenics anticipates that a settlement will be reached without incurring significant out-of-pocket costs. At this time, we cannot make a reliable estimate of possible loss, if any, related to this litigation.

      On February 19, 2004, Jonathan Lewis, M.D., our former Chief Medical Officer, filed a complaint against us in the United States District Court for the Southern District of New York. The suit alleges that we terminated Dr. Lewis without cause and have failed to pay severance benefits to which Dr. Lewis believes he is entitled. The complaint seeks relief for breach of contract and intentional infliction of emotional distress. Dr. Lewis is seeking damages in excess of $2 million. Discovery in this matter is ongoing and is presently scheduled to end in October 2004. A settlement conference is scheduled with the court in October as well. We intend to defend against these claims and as we do not believe that a loss is probable, no reserve has been recorded.

      From time to time as a normal incidence of the nature of our business, various claims, charges and litigation are asserted or commenced against us arising from, or related to, contractual matters, patents, trademarks, personal injury, environmental matters, product liability, insurance coverage and personnel and employment disputes. As to such claims and litigation, including those items discussed above, we may not prevail. We do not expect the ultimate outcome of any of these matters will have a material adverse effect

8

ANTIGENICS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

on our consolidated financial position, results of operations or liquidity. However, litigation is subject to inherent uncertainty and consumes both cash and management attention.

Note H — Discontinued Operations

      On March 17, 2004, we sold our manufacturing rights for feline leukemia virus (FeLV) vaccine and related assets to French veterinary pharmaceutical manufacturer Virbac S.A. (“Virbac”). Pursuant to this arrangement, in exchange for the transfer of our manufacturing rights and related equipment for FeLV, we received $10,302,000 in cash. An additional $4,250,000 is due upon the production of “Initial Batches” as defined in the asset purchase agreement, provided that Virbac shall attempt in good faith to manufacture the Initial Batches within six months of the closing date, and in no case beyond eight months from the closing. Accordingly, this amount is reflected in other current assets on the balance sheet at June 30, 2004. In addition, we entered into a sublease agreement with PP Manufacturing, a subsidiary of Virbac, for a portion of the manufacturing facility in Framingham, MA.

      In April 2004, upon the satisfaction of a contingency of the sale, in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, we recorded a gain on the divestiture of these assets of approximately $13,960,000. The carrying value of the assets sold and liabilities assumed were approximately $409,000 and $15,000, respectively. In addition we have classified the results of operations of the FeLV activity as discontinued operations in the accompanying consolidated financial statements, for all periods presented. The income (losses) from discontinued operations consist of the following:

		Three Months					Six Months
		Ended June 30,					Ended June 30,
		2004		2003			2004			2003
Revenue		$	—	$	922,000		$	338,000		$	1,807,000
Expenses
	Cost of Sales		—		(475,000	)		(594,000	)		(1,095,000	)
	Research & Development		—		(219,000	)		(194,000	)		(414,000	)
	General & Administrative		—		(89,000	)		(476,000	)		(155,000	)
Net income (loss) from discontinued operations		$	—	$	139,000		$	(926,000	)	$	143,000

      Virbac has held exclusive perpetual worldwide marketing rights to the FeLV vaccine since 1983. The supply agreement was up for renewal in July 2002, at which point we began to supply product to Virbac through month-to-month supply agreements until the sale of our FeLV manufacturing rights to them in March 2004. Subsequent to the completion of the sale there will be no further product sales.

Note I — Subsequent Event

      On July 30, 2004 we issued 350,000 shares of our common stock and paid $200,000 in cash to Mojave Therapeutics Inc. as consideration to purchase all of their intellectual property and scientific assets relating to their heat shock protein based antigen delivery system and other technologies.

9

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

      We are currently researching and developing products to treat cancers, infectious diseases and autoimmune disorders. Since our inception in March 1994, our activities have primarily been associated with the development of our heat shock protein technology and our most advanced product candidate, Oncophage. Our business activities have included product research and development, intellectual property prosecution, manufacturing therapeutic vaccines for clinical trials, regulatory and clinical affairs, corporate finance and development activities, and integration of our acquisitions.

      We have incurred significant losses since our inception. As of June 30, 2004, we had an accumulated deficit of $299,937,000. We continue to finance the majority of our operations through the sale of equity. For the six months ended June 30, 2004 and 2003, we raised through the sale of equity and exercises of stock options net proceeds of approximately $54,283,000 and $60,480,000, respectively.

      We expect, as we have in the past, to attempt to raise additional funds substantially in advance of depleting our current funds. Satisfying long-term liquidity needs will require the successful commercialization of Oncophage or other products and may require substantial additional capital. We expect that we will be able to fund our growing operations and capital expenditures with our current working capital through the end of 2005.

      On March 17, 2004, we sold our manufacturing rights for feline leukemia virus (FeLV) vaccine and related assets to French veterinary pharmaceutical manufacturer Virbac S.A. (“Virbac”). Pursuant to this arrangement, in exchange for the transfer of our manufacturing rights and related equipment for FeLV, we received $10,302,000 in cash. An additional $4,250,000 is due upon the production of “Initial Batches” as defined in the asset purchase agreement, provided that Virbac shall attempt in good faith to manufacture the Initial Batches within six months of the closing date, and in no case beyond eight months after the closing. Accordingly, this amount is reflected in other current assets on the balance sheet at June 30, 2004. In addition, we entered into a sublease agreement with PP Manufacturing, a subsidiary of Virbac, for a portion of the manufacturing facility in Framingham, MA.

      In April 2004, upon the satisfaction of a contingency of the arrangement, we recorded a gain on the divestiture of these assets of approximately $13,960,000. The carrying value of the assets sold and liabilities assumed were approximately $409,000 and $15,000, respectively.

      Virbac has held exclusive perpetual worldwide marketing rights to the FeLV vaccine since 1983. The supply agreement was due for renewal in July 2002, at which point we began to supply product to Virbac through month-to-month supply agreements until the sale of our FeLV manufacturing rights to them in March.

      To date, we have generated product sales revenues from this one product, the feline leukemia vaccine, the rights to which we sold to Virbac. As a result of the sale, we will not generate further product sales revenue. Our revenues from this product were $338,000 and $1,807,000 for the six months ended June 30, 2004, and 2003, respectively. These amounts are included in our income from discontinued operations presented in the unaudited consolidated statement of operations. During the six months ended June 30, 2004 and 2003, we also had research and development revenues of $296,000 and $928,000, respectively, representing grant payments earned, and in 2003, shipments of our adjuvant QS-21 to our QS-21 licensees.

Forward-Looking Statements

      This report contains forward-looking statements, including statements regarding the expected settlement of securities litigation, our ability to satisfy the FDA that our current Phase 3 clinical trials should be sufficient to support a biologics license application, our future development activities, our ability to commercialize products, the timing of completion of clinical trials, the timing of future regulatory

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filings, our future financial results, estimated future payments for clinical trials, future capital expenditures, the impact of litigation, the impact on our investments of future fluctuations in interest rates, and other statements expressed in terms of our expectations, plans or goals. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated in these forward-looking statements. Our ability to settle the securities litigation, for example, will depend on decisions made by plaintiffs, insurance companies, underwriters, and courts, all of which are beyond our control. Our efforts to develop and commercialize our product candidates, and the timing of regulatory filings and analysis of clinical trial data, will depend on, among other matters, our ability to enroll sufficient numbers of patients in clinical trials and to satisfy regulatory agencies that our product candidates are safe, effective and adequately characterized and that our trials are adequately designed, which may require considerable information and effort and still be unsuccessful and which may require additional clinical trials with different study designs. Levels of future expenditures will depend on the activities we are required to undertake to satisfy regulatory requirements, the timing of our efforts, and inflationary trends. General financial market conditions will impact the value of our investments. Our business is subject to substantial risk. Risks and uncertainties, including the factors identified under “Factors That May Impact Future Results” will substantially determine whether we are successful and whether the results indicated by the forward-looking statements occur. We caution investors not to place considerable reliance on the forward-looking statements contained in this report. These statements speak only as of the date of this report, and we undertake no obligation to update or revise the statements.

Historical Results of Operations

Three Months Ended June 30, 2004 Compared To The Three Months Ended June 30, 2003

      Revenue: We generated $187,000 and $33,000 of research and development revenue during the three months ended June 30, 2004 and 2003, respectively. Revenues from research and development activities include grant payments earned and, in 2003, shipments of our adjuvant QS-21 product to our QS-21 licensees.

      Research and Development: Research and development expenses include the costs associated with our internal research and development activities, including salaries and benefits, occupancy costs, clinical manufacturing costs, related administrative costs, and research and development conducted for us by outside advisors, such as sponsored university-based research partners, including the University of Connecticut where we sponsor research, and clinical research organizations as well as expenses related to grant revenue. Research and development expense decreased 7% to $10,879,000 for the three months ended June 30, 2004 from $11,757,000 for the three months ended June 30, 2003. The decrease was primarily due to clinical trial related expenses associated with the reduced enrollment for our Phase 3 renal cell carcinoma trial as it nears the end of the enrollment phase. As compared to the same period in 2003, these trial related expenses have decreased $700,000. Also contributing to the decrease was a reduction in sponsored research agreement expenses of $297,000 as compared to the second quarter of 2003. Other research and development expenses increased $119,000 for the three months ended June 30, 2004 when compared to the three months ended June 30, 2003.

      General and Administrative: General and administrative expenses consist primarily of personnel compensation, office expenses and professional fees. General and administrative expenses increased 23% to $6,576,000 for the three months ended June 30, 2004 from $5,351,000 for the three months ended June 30, 2003. The increase was primarily due to the $493,000 increase in professional fees relating to increased recruiting, legal fees, and consulting services. Additionally, personnel related expenses have increased $624,000 over the same period in 2003 due to salary increases, the growth of our operations and higher travel expenses. Other general and administrative expenses increased $108,000 for the three months ended June 30, 2004 over the same period in 2003.

      Interest Income: Interest income increased 11% to $357,000 for the three months ended June 30, 2004 from $322,000 for the same period in 2003. This increase is attributable to the higher cash balances that were held in 2004.

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      Interest Expense: Interest expense increased 3,555% to $138,000 for the three months ended June 30, 2004 from $4,000 for the three months ended June 30, 2003. The increase is attributable to our increased debt balance during the three-month period ended June 30, 2004, as compared to our debt outstanding during the three-month period ended June 30, 2003.

      Discontinued Operations: Due to the sale of our manufacturing rights for feline leukemia virus (FeLV) vaccine and related assets to Virbac, we have reported the results of those operations as discontinued in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”.

Six Months Ended June 30, 2004 Compared To The Six Months Ended June 30, 2003

      Revenue: We generated $296,000 and $928,000 of research and development revenue during the six months ended June 30, 2004 and 2003, respectively. Revenues from research and development activities include grant payments earned and, in 2003, shipments of our adjuvant QS-21 product to our QS-21 licensees. The decrease between the first half of 2003 and the first half of 2004 was related to the absence of demand for our adjuvant QS-21 product during the six months ended June 30, 2004 and a large non-recurring shipment which occurred during the first half of 2003.

      Research and Development: Research and development expenses include the costs associated with our internal research and development activities, including salaries and benefits, occupancy costs, clinical manufacturing costs, related administrative costs, and research and development conducted for us by outside advisors, such as sponsored university-based research partners, including the University of Connecticut where we sponsor research, and clinical research organizations as well as expenses related to grant revenue. Research and development expense decreased less than 1% to $21,825,000 for the six months ended June 30, 2004 from $21,878,000 for the six months ended June 30, 2003. The decrease was primarily due to clinical trial related expenses associated with the reduced enrollment for our Phase 3 renal cell carcinoma trial as it nears the end of the enrollment phase. These trial related expenses have decreased $1,000,000 as compared to the first six months of 2003. In addition, depreciation expense decreased $346,000 due mostly to the exiting of the Woburn facility. Offsetting these decreases was an increase of $748,000 for the cost of simultaneously occupying and maintaining both the Lexington and Woburn, Massachusetts facilities for the first three months of 2004. Manufacturing expenses increased $564,000 over the first six months of 2003 as resources were re-focused to non-commercial activities after the Virbac transaction. Other research and development expenses decreased $19,000 for the six months ended June 30, 2004 when compared to the six months ended June 30, 2003.

      General and Administrative: General and administrative expenses consist primarily of personnel compensation, office expenses and professional fees. General and administrative expenses increased 22% to $12,121,000 for the six months ended June 30, 2004 from $9,954,000 for the six months ended June 30, 2003. The increase was primarily due to the $1,197,000 increase in personnel compensation associated with the growth of our operations since the second quarter of 2003 and to severance compensation paid to one of our executives. Professional service expenses increased $494,000 primarily due to additional recruiting expenses and increased consulting expenses. Additionally, travel related expenses have increased $244,000 compared to the six months ended June 30, 2003 due to the growth of our operations. Other general and administrative expenses increased $232,000 for the six months ended June 30, 2004 over the same period in 2003.

      Interest Income: Interest income decreased 1% to $661,000 for the six months ended June 30, 2004 from $668,000 for the same period in 2003. This decrease is attributable to lower interest rates during the six months ended June 30, 2004 as compared to the six months ended June 30, 2003. Our average interest rate decreased from approximately 1.36% for the six months ended June 30, 2003, to approximately 1.15% for the six months ended June 30, 2004.

      Interest Expense: Interest expense increased 1,661% to $290,000 for the six months ended June 30, 2004 from $16,000 for the six months ended June 30, 2003. The increase is attributable to our increased

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debt balance during the six-month period ended June 30, 2004, as compared to our debt outstanding during the six-month period ended June 30, 2003.

      Discontinued Operations: Due to the sale of our manufacturing rights for feline leukemia virus (FeLV) vaccine and related assets to Virbac, we have reported the results of those operations as discontinued in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”.

Research and Development Programs

      Prior to 2002, we did not track costs on a per project basis, and therefore have estimated the allocation of our total research and development costs to each of our three largest research and development programs. These research and development programs contain our four lead product candidates, Oncophage®, AG-858, Aroplatin^TM, and AG-702/707, as indicated in the following table.

					Year Ended December 31,
			Six Months Ended
Research and Development Program	Lead Product		June 30, 2004		2003		2002		2001		Prior to 2001
Heat Shock Proteins for Cancer	Oncophage & AG-858		$	18,657,000	$	41,335,000	$	32,367,000	$	23,277,000	$	36,798,000
Heat Shock Proteins for Infectious Diseases		AG-702/707		1,339,000		2,447,000		1,301,000		735,000		2,085,000
Liposomal Cancer Treatments*		Aroplatin		337,000		1,263,000		2,149,000		1,442,000		—
Other Research and Development Programs				1,492,000		3,482,000		4,166,000		5,903,000		2,590,000
Total Research and Development Expenses			$	21,825,000	$	48,527,000	$	39,983,000	$	31,357,000	$	41,473,000

*  Prior to 2001 costs were incurred by Aronex Pharmaceuticals, a company we acquired in July 2001.

      We have allocated direct and indirect costs to each program based on certain assumptions and our review of the status of each program, payroll-related expenses and other overhead costs based on estimated usage by each program. Each of our lead product candidates is in various stages of completion as described below. Significant additional expenditures will be required if we complete our clinical trials, start new trials, apply for regulatory approvals, continue development of our technologies, expand our operations and bring our products to market. The eventual total cost of each clinical trial is dependent on a number of uncertainties such as trial design, the length of the trial, the number of clinical sites and the number of patients. The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive and uncertain. Because the successful development of our most advanced product candidate, Oncophage, is uncertain, and because AG-858, AG-702/707, and Aroplatin are in early-stage clinical development, we are unable to reliably estimate the cost of completing our research and development programs, the timing of bringing such programs to market and, therefore, when material cash inflows are likely to commence.

Oncophage

      We started enrolling patients in our first clinical trial studying Oncophage in November 1997. To date, over 700 patients have been treated with Oncophage in our various clinical trials. We have ongoing Phase 1 and Phase 2 trials in several types of cancer as well as a Phase 3 trial for renal cell carcinoma and a Phase 3 trial for melanoma. Because Oncophage is a novel cancer therapeutic vaccine that is personalized for each patient, it may experience a longer regulatory review process and higher development costs either of which could delay or prevent our commercialization efforts. For additional information regarding regulatory risks and uncertainties, please read the factors identified under “Factors That May Impact Future Results.”

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      On September 3, 2003, we announced that the United States Food and Drug Administration (FDA) placed our Phase 3 Oncophage clinical trials on partial clinical hold indicating that Oncophage was not sufficiently characterized. With FDA approval, we continued to treat and monitor patients who were already enrolled in the trials as of that date. On October 23, 2003, we submitted to the FDA additional Oncophage product characterization information, and on November 23, 2003, the agency lifted the partial clinical hold. On December 22, 2003, we announced the result of the planned interim analysis of the data from our ongoing Phase 3 trial of Oncophage in renal cell carcinoma. Based on its review of the safety data, efficacy data, and other information regarding the trial, the independent Data Monitoring Committee (DMC) for the trial recommended that the trial proceed as planned and did not require that we change the patient accrual goals for a successful analysis of the Phase 3 trial. At the interim analysis, the DMC also declared the design and conduct of the trial sound and raised no safety concerns.

      We held a Type A meeting with the medical team of the FDA in which we presented our product registration plan for Oncophage in renal cell carcinoma. The FDA expressed agreement with our overall proposed registration plan. This plan includes our ability to use the current Phase 3 trial as part of our product registration strategy as well as starting a second Phase 3 trial in the same patient population. We plan to initiate this second Phase 3 trial in renal cell carcinoma during the third quarter of 2004.

      The final analysis for our Phase 3 trial in renal cell carcinoma, study C-100-12, will be triggered once a pre-specified number of events occur. An event is defined as a recurrence of a patient’s renal cell carcinoma or a death of a patient. Events are reviewed and confirmed, on a blinded basis, by an independent Clinical Events Committee comprised of expert radiologists and an expert oncologist. Based on the overall trend of events in C-100-12 to date, we believe that the earliest the final analysis for this trial will be triggered is in early 2005.

      We expect to complete enrollment of our ongoing Phase 3 trial in melanoma, Study C-100-21 during 2004. We had a meeting with the DMC during the first quarter of 2004 to review the safety and conduct of our Phase 3 melanoma trial of Oncophage. This meeting was not an interim analysis of the efficacy data from this trial. Our overall manufacturing success rate for our C-100-21 trial is approximately 69%. Our inability to manufacture adequate amounts of Oncophage for approximately 31% of the patients randomized in the Oncophage treatment arm may jeopardize the potential for the trial, as currently designed, to meet its pre-specified clinical endpoints. We have addressed the lower manufacturing success rate for melanoma and have implemented changes in the third quarter of 2004 to improve the manufacturing success rate in this trial. We are also evaluating whether or not changes should be made to the design, enrollment targets, or planned conclusion of C-100-21. If such changes are required, it will substantially delay our efforts to file a biologics license application (BLA) for Oncophage in melanoma. We are planning a second Phase 3 trial in melanoma in collaboration with large cooperative groups.

      We recently initiated a Phase 1/2 trial of Oncophage in lung cancer. We intend to initiate a Phase 2 trial in breast cancer, as well as Phase 2 trials of Oncophage in combination with other molecules for advanced disease in multiple tumor types.

AG-858

      In December 2002, interim data were reported from a pilot Phase 1 clinical trial conducted at the University of Connecticut School of Medicine using HSPPC-70, a purified HSP70 and its associated antigens, for the treatment of chronic myelogenous leukemia, or CML. In April 2003, we initiated a Phase 2 trial in CML combining AG-858, our HSP70 based product candidate, with Gleevac in patients with CML refractory to Gleevac. We expect to complete enrollment in this trial by early 2005 and to release the data from this trial approximately 12-15 months after completion of enrollment.

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AG-702/707

      We initiated a pilot Phase 1 clinical trial of AG-702 in the fourth quarter of 2001 and we expect to complete enrollment of this trial in 2004. AG-702 is a vaccine formulation containing one peptide antigen of the herpes virus. AG-707 is a vaccine formulation containing over 30 HSV-2 peptide antigens. We expect to file an Investigational New Drug application (IND) for AG-707 for the treatment of genital herpes in the second half of 2004.

Aroplatin

      We initiated Phase 2 clinical trials of Aroplatin for colorectal cancer and other solid tumors in 2002 and released data from the colorectal cancer trial in the third quarter of 2003. We completed enrollment of the first cohort of patients in both trials and at this time do not intend to enroll additional patients. A new formulation of Aroplatin has been identified that will offer increased product stability, activity and scalability for commercialization. Preclinical testing will conclude during 2004 followed, if successful, by further clinical development.

Liquidity and Capital Resources

      We have incurred annual operating losses since inception, and, as of June 30, 2004, we had an accumulated deficit of $299,937,000. We expect to incur significant losses over the next several years as we continue our clinical trials, apply for regulatory approvals, continue development of our technologies, and expand our operations. Since our inception, we have financed our operations primarily through the sale of equity, interest income earned on cash, cash equivalents, and short-term investment balances and debt provided through secured lines of credit. From our inception through June 30, 2004, we raised aggregate net proceeds of $350,556,000 through the sale of equity, stock options and warrants and proceeds from our employee stock purchase plan, and borrowed $20,523,000 under two credit facilities. At June 30, 2004, we have debt outstanding of approximately $12,711,000. In April 2003, we filed a registration statement with the Securities and Exchange Commission for the registration and potential issuance of up to $100 million of registered securities. In September 2003, in a private placement, we sold 31,620 shares of our newly created Series A Convertible Preferred Stock for net proceeds of $31,606,000. In February 2004, we sold 5,400,000 shares of our common stock for net proceeds of approximately $54 million.

      We expect that we will be able to fund our capital expenditures and growing operations with our current working capital through the end of 2005. In order to fund our needs subsequently, we will need to raise additional money and may be able to do so by: (1) out-licensing technologies or products to one or more corporate partners, (2) renegotiating license agreements with current corporate partners, (3) completing an outright sale of assets, (4) securing additional debt financing and/or (5) completing securities offerings. Our ability to successfully enter into any such arrangements is uncertain and if funds are not available, or not available on terms acceptable to us, we may be required to revise our planned clinical trials and other development activities and capital expenditure requirements. We expect to attempt to raise additional funds substantially in advance of depleting our current funds; however, we may not be able to raise funds or raise amounts sufficient to meet the long-term needs of the business. Satisfying long-term liquidity needs will require the successful commercialization of Oncophage or other products and, at this time, we cannot reliably estimate if or when that will occur, and the process may require additional capital as discussed above. Please see the “Forward-Looking Statements” section and the factors highlighted in the “Factors That May Impact Future Results” section.

      Our future cash requirements include, but are not limited to, supporting our clinical trial efforts and continuing our other research and development programs. Since inception we have entered into various agreements with institutions and clinical research organizations to conduct and monitor our current clinical studies. Under these agreements, subject to the enrollment of patients and performance by the applicable institution of certain services, we have estimated our payments to be $46,342,000 over the term of the studies. Through June 30, 2004, approximately $28,600,000 has been expensed as research and

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development expenses and $22,137,000 has been paid related to these clinical studies. The timing of our expense recognition and future payments related to these agreements are subject to the enrollment of patients and performance by the applicable institutions of certain services. As we expand our clinical studies, we plan to enter into additional agreements. In addition, we have entered into sponsored research agreements related to our products that require payments of approximately $9,878,000, of which $3,042,000 has been paid through June 30, 2004. Part of our strategy is to develop and commercialize some of our product candidates by continuing our existing collaborative arrangements with academic and corporate partners and licensees and by entering into new collaborations. As a result of our collaborative agreements, we will not completely control the efforts to attempt to bring those product candidates to market. We have various agreements with corporate licensees that allow the use of our QS-21 adjuvant in numerous vaccines. These agreements grant exclusive worldwide rights in some fields of use, and co-exclusive or non-exclusive rights in others. The agreements call for royalties to be paid to us by the licensee on future sales of licensed vaccines that include QS-21, which may not be achieved.

      Our cash, cash equivalents and short-term investments at June 30, 2004 were $117,483,000, an increase of $28,005,000 from December 31, 2003. During the six months ended June 30, 2004, we used cash primarily to finance our research operations, including our Oncophage clinical trials. Net cash used in continuing operations for the six months ended June 30, 2004 and 2003 was $31,791,000 and $24,587,000, respectively. The increase resulted primarily from the increase in the activity of our Oncophage clinical trials, on-going development activities and the general expansion of our research and administrative operations. As we develop our technologies and further our clinical trial programs, we expect to increase our spending. Our future ability to generate cash from operations will depend on achieving regulatory approval of our products, market acceptance of such products, achieving benchmarks as defined in existing collaborative agreements, and our ability to enter into new collaborations. Please see the “Forward-Looking Statements” section and the matters highlighted in the “Factors That May Impact Future Results” section.

      Net cash used in investing activities for the six months ended June 30, 2004 was $27,991,000 as compared to $10,105,000 for the six months ended June 30, 2003. During the six months ended June 30, 2004, we invested $60,836,000 of our available cash in short-term investments and received proceeds from the maturity of such investments of $23,569,000. Additionally, for the six months ended June 30, 2004, we invested $1,271,000 in the purchase of equipment, furniture and fixtures for the build-out of our Lexington, Massachusetts facility. We anticipate additional capital expenditures of up to $3,700,000 during 2004. We have also received $8,302,000 for the divestiture of our manufacturing and certain intellectual property rights to the feline leukemia vaccine. In addition, we received $2,238,000 pertaining to the reduction of our restricted cash balance.

      Net cash provided by financing activities was $50,816,000 for the six months ended June 30, 2004 as compared to $60,212,000 for the six months ended June 30, 2003. Since inception, our primary source of financing has been from equity sales. During the six months ended June 30, 2004 and 2003, net proceeds from sales of equity and exercises of stock options totaled approximately $54,283,000 and $60,480,000, respectively. During the six months ended June 30, 2004, we repaid $3,156,000 of our debt balance under our credit facility.

      Effective March 17, 2004, we sublet part of our Framingham manufacturing and office space to PP Manufacturing, a subsidiary of Virbac, in connection with the sale of our manufacturing rights for feline leukemia vaccine. This sublease agreement expires on September 30, 2010. Effective July 19, 2002 we sublet part of our Framingham manufacturing, research and development, and office space to GTC Biotherapeutics, Inc. and we have leased related leasehold improvements and equipment under agreements which expire in December 31, 2006. GTC Biotherapeutics has an option to extend this lease until September 30, 2010. As a result of the PP Manufacturing lease agreement, we amended our agreement with GTC Biotherapeutics, Inc. effective March 16, 2004, adjusting the leasable square footage. Under the terms of our original lease, we are obligated to pay our landlord approximately 7% of our rental income.

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      In addition, we sublet part of our Texas and New York facilities to a number of small private companies under agreements that expire in January 2008 and July 2004 respectively. We are contractually entitled to receive rental income on all facilities, of $1,226,000 in 2004; $1,286,000 in 2005; $1,375,000 in 2006; $753,000 in 2007 and $535,000 in 2008, and $902,000 thereafter; the collection of this income, however, is subject to uncertainty including the solvency of the lessees.

      We are currently involved in certain legal proceedings as described in Note G to our unaudited consolidated financial statements above. We do not believe these proceedings will have a material adverse effect on our consolidated financial position, results of operations or liquidity, but litigation is subject to inherent uncertainty.

Related Parties

      As of June 30, 2004, we had invested $1,875,000 in a limited partnership — Applied Genomic Technology Capital Fund, or AGTC. Our total capital commitment to AGTC is $3,000,000. One of our directors, Noubar Afeyan, Ph.D., is the Senior Managing Director and CEO of a partnership of funds that include the general partner of AGTC. In addition, Garo H. Armen, Ph.D., our chairman and chief executive officer, is a director of NewcoGen Group Inc. For details, please refer to Note G to our unaudited consolidated financial statements.

      As detailed in Note 11 to our consolidated financial statements included in Form 10-K for the year ended December 31, 2003 filed with the SEC, our predecessor company, Founder Holdings, Inc., which, indirectly, remains a significant shareholder, approved a stock option plan pursuant to which our officers, directors, employees and consultants may be granted options in the predecessor company. In accordance with accounting principles generally accepted in the United States of America, options granted under this plan are accounted for as compensation expense by us and treated as a contribution to stockholders’ equity.

      We currently have a QS-21 license and supply agreement with Neuralab Limited, a wholly-owned subsidiary of Elan Corporation, plc, for use of QS-21 with an antigen in the field of Alzheimer’s disease. Garo H. Armen, Ph.D., our Chairman and Chief Executive Officer, is the non-executive Chairman of Elan and a nominal employee of a different wholly-owned subsidiary of Elan. For the six months ended June 30, 2004, no revenues were generated under the agreement with Neuralab and, accordingly, at June 30, 2004, we have no amounts due to us under this agreement.

      In March 1995, we entered into a consulting agreement with Dr. Pramod Srivastava, our scientific founder and one of our directors. This agreement expires in March 2005 but will be automatically extended for additional one-year periods unless either party decides not to extend the agreement. In 2004, we paid Dr. Srivastava a cash bonus of $135,000 and the compensation committee approved a stock option grant to purchase 120,000 shares of our common stock for services performed in 2003.

      In February 1998 we entered into a research agreement with the University of Connecticut Health Center (UConn) to fund research in Dr. Srivastava’s laboratory at Uconn. Dr. Srivastava is a member of the faculty of the University of Connecticut School of Medicine and one of our directors. The research agreement was amended on December 30, 2003, to extend the term to December 31, 2008 and calls for payments to UConn totaling a minimum of $6,750,000, payable quarterly at the rate of $337,500 (contingent on the continuing employment of Dr. Srivastava by UConn). In return, we have an option to obtain an exclusive license to new inventions (as defined in the research agreement) subject to our payment to UConn of royalties at varying rates upon commercialization of a product utilizing technology discovered under the research agreement.

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Factors That May Impact Future Results

      Our future operating results could be negatively impacted by, and the results contemplated by forward-looking statements may differ materially, due to the risks and uncertainties described below.

Risks Related to our Business

If we incur operating losses for longer than we expect, we may be unable to continue our operations.

      From our inception through June 30, 2004, we have generated net losses totaling $300 million. Our net losses for the six months ended June 30, 2004, and for the years ended December 31, 2003, 2002, and 2001 were $20.2 million, $65.9 million, $55.9 million, and $73.5 million, respectively. We expect to incur significant losses over the next several years as we continue our clinical trials, apply for regulatory approvals, continue development of our technologies, and expand our operations. Phase 3 clinical trials are particularly expensive to conduct, and we plan to initiate two new Phase 3 clinical trials during 2004, one in renal cell carcinoma and one in melanoma. Furthermore, our ability to generate cash from operations is dependent on if and when we will be able to commercialize our products. We expect that the earliest we may be able to commercialize Oncophage would be in late 2005. If we incur operating losses for longer than we expect, we may be unable to continue our operations.

If we fail to obtain the capital necessary to fund our operations, we will be unable to advance our development programs and complete our clinical trials.

      On June 30, 2004, we had approximately $117 million in cash, cash equivalents and short-term investments. In February 2004, we sold 5,400,000 shares of our common stock, raising net proceeds of approximately $54 million. With our current capital we expect that we could fund our development programs, clinical trials, and other operating expenses through the end of 2005. We plan to raise additional funds prior to that time. For the six months ended June 30, 2004, the sum of our average monthly cash used in operating activities plus our average monthly capital expenditures was approximately $5.5 million. Total capital expenditures for the six months ended June 30, 2004 were $1.3 million. We anticipate additional capital expenditures of up to $3.7 million during the remainder of 2004. Since our inception, we have financed our operations primarily through the sale of equity. In order to finance our future operations, we will be required to raise additional funds in the capital markets, through arrangements with corporate partners, or from other sources. Additional financing, however, may not be available on favorable terms or at all. If we are unable to raise additional funds when we need them, we will be required to delay, reduce, or eliminate some or all of our development programs and some or all of our clinical trials, including the development programs and clinical trials supporting our most advanced product candidate, Oncophage. We also may be forced to license technologies to others under agreements that allocate to third parties substantial portions of the potential value of these technologies.

The commercial launch of Oncophage will be significantly delayed or prevented if we are unable to convince the United States Food and Drug Administration that our Phase 3 trials of Oncophage, our most advanced product candidate, are sufficient to support licensure of Oncophage.

      On September 3, 2003, the FDA placed our Phase 3 Oncophage clinical trials in renal cell carcinoma and in melanoma on partial clinical hold. The FDA’s written correspondence instituting the partial clinical hold indicated that Oncophage was not sufficiently characterized and that based on the then current level of Oncophage product characterization information provided to the FDA, the FDA would refuse the filing of a biologics license application, or BLA. On October 24, 2003, we submitted additional Oncophage product characterization information to the FDA, and on November 24, 2003, we announced that the FDA had lifted the partial clinical hold. Even though the FDA lifted the partial clinical hold, the FDA has informed us that, for purposes of our Phase 3 trial in renal cell carcinoma (trial C-100-12) and our Phase 3 trial in melanoma (trial C-100-21), Oncophage has been insufficiently characterized and that the results obtained with an inadequately characterized product could not be used to provide efficacy data in support of a biologics license application. We have since provided additional information to the FDA

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regarding product characterization and believe we have addressed their comments. However, we may not succeed in convincing the FDA that the data from these trials, even if significantly positive, should be considered pivotal and sufficient to support licensure of Oncophage. In this event, we will be required to enroll additional patients and/or to complete additional trials in both renal cell carcinoma and melanoma to support BLA filings for Oncophage. This may significantly delay or prevent the commercial launch of Oncophage and negatively impact our financial prospects.

If the results from our first Phase 3 trials of Oncophage do not demonstrate efficacy, our commercial launch of Oncophage will be delayed or prevented and our business prospects will be substantially diminished.

      In December 2003, we announced that the Data Monitoring Committee, or DMC, had convened as scheduled for the interim analysis of our ongoing Phase 3 clinical trial of Oncophage in the treatment of renal cell carcinoma, C-100-12. The DMC recommended that the trial proceed as planned and did not require that we change patient accrual goals. These recommendations do not assure either that the trial will demonstrate statistically significant results or that the trial will prove adequate to support approval of Oncophage for commercialization in the treatment of patients with renal cell carcinoma. The final data from the trial may not sufficiently demonstrate levels of efficacy and safety necessary to support marketing approval by the FDA and other regulatory agencies. Data from clinical trials are subject to varying interpretations.

      Inconclusive or negative final data from the current Phase 3 renal cell carcinoma trial, C-100-12, or interim or final data from the current Phase 3 melanoma trial, C-100-21, would have a significant negative impact on our prospects and likely would cause a sharp sell-off of our securities. If the results in our Phase 3 trials are not sufficiently positive to garner approval from regulatory agencies, we may abandon development of Oncophage for the applicable indication or we may expend considerable resources repeating the trials or starting different trials. These activities would reduce our prospects for generating revenue in the near term and increase our losses.

The regulatory approval process is uncertain, time-consuming and expensive.

      The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive and uncertain. It also can vary substantially, based on the type, complexity and novelty of the product. Our most advanced product candidate, Oncophage, is a novel cancer therapeutic vaccine that is personalized for each patient. To date, the FDA has not approved any cancer therapeutic vaccines for commercial sale, and foreign regulatory agencies have approved only a limited number. Both the FDA and foreign regulatory agencies have relatively little experience in reviewing personalized medicine therapies, and the partial clinical hold that the FDA had placed on our current Phase 3 Oncophage clinical trials primarily related to product characterization issues partially associated with the personalized nature of Oncophage. Oncophage may experience a long regulatory review process and high development costs, either of which could delay or prevent our commercialization efforts.

      To obtain regulatory approvals, we must, among other requirements, complete carefully controlled and well-designed clinical trials demonstrating that a particular product candidate is safe and effective for the applicable disease. Several biotechnology companies have failed to obtain regulatory approvals because regulatory agencies were not satisfied with the structure or conduct of clinical trials or the ability to interpret the data from the trials; similar problems could delay or prevent us from obtaining approvals. We plan to initiate an additional Phase 3 trial for Oncophage during the second half of 2004 in renal cell carcinoma. We intend to use this Phase 3 trial to support approval of Oncophage in renal cell carcinoma. During 2004, we also intend to initiate a second Phase 3 trial in melanoma in collaboration with large cooperative groups. Even after reviewing the protocols for our planned Phase 3 trials, the FDA and other regulatory agencies may not consider our ongoing trials together with these new trials to be adequate for registration and may disagree with our overall strategy to seek approval for Oncophage in renal cell carcinoma and melanoma. In this event, the potential commercial launch of Oncophage would be

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significantly delayed, which would likely have a materially negative impact on our ability to generate revenue and our need for additional funding.

      The timing and success of a clinical trial is dependent on enrolling sufficient patients in a timely manner, avoiding adverse patient reactions and demonstrating in a statistically significant manner the safety and efficacy of the product candidate. Because we rely on third-party clinical investigators and contract research organizations to conduct our clinical trials, we may encounter delays outside our control, particularly if our relationships with any third-party clinical investigators or contract research organizations are adversarial. The timing and success of our Phase 3 trials, in particular, are also dependent on the FDA and other regulatory agencies accepting each trial’s protocol, statistical analysis plan, product characterization tests, and clinical data. If we are unable to satisfy the FDA and other regulatory agencies with such matters, including the specific matters noted above, and/or our Phase 3 trials yield inconclusive or negative results, we will be required to modify or expand the scope of our Phase 3 studies or conduct additional Phase 3 studies to support BLA filings, including additional studies beyond the two new Phase 3 trials in renal cell carcinoma and melanoma that we plan to initiate during 2004. In addition, the FDA may request additional information or data to which we do not have access. Delays in our ability to respond to such an FDA request would delay, and failure to adequately address all FDA concerns would prevent, our commercialization efforts.

      In addition, we, or the FDA, might further delay or halt our clinical trials for various reasons, including but not limited to:

•  we may fail to comply with extensive FDA regulations;

•  a product candidate may not appear to be more effective than current therapies;

•  a product candidate may have unforeseen or significant adverse side effects or other safety issues;

•  the time required to determine whether a product candidate is effective may be longer than expected;

•  we may be unable to adequately follow or evaluate patients after treatment with a product candidate;

•  patients may die during a clinical trial because their disease is too advanced or because they experience medical problems that may not be related to the product candidate;

•  sufficient numbers of patients may not enroll in our clinical trials; or

•  we may be unable to produce sufficient quantities of a product candidate to complete the trial.

Furthermore, regulatory authorities, including the FDA, may have varying interpretations of our pre-clinical and clinical trial data, which could delay, limit, or prevent regulatory approval or clearance. Any delays or difficulties in obtaining regulatory approvals or clearances for our product candidates may:

•  adversely affect the marketing of any products we or our collaborators develop;

•  impose significant additional costs on us or our collaborators;

•  diminish any competitive advantages that we or our collaborators may attain; and

•  limit our ability to receive royalties and generate revenue and profits.

If we do not receive regulatory approval for our products in a timely manner, we will not be able to commercialize them in the timeframe anticipated, and, therefore, our business will suffer.

We must receive separate regulatory approvals for each of our product candidates for each type of disease indication before we can market and sell them in the United States or internationally.

      We and our collaborators cannot sell any drug or vaccine until we receive regulatory approval from governmental authorities in the United States, and from similar agencies in other countries. Oncophage

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and any other drug candidate could take a significantly longer time to gain regulatory approval than we expect or may never gain approval or may gain approval for only limited indications.

Even if we do receive regulatory approval for our product candidates, the FDA or international regulatory authorities will impose limitations on the indicated uses for which our products may be marketed or subsequently withdraw approval, or take other actions against us or our products adverse to our business.

      The FDA and international regulatory authorities generally approve products for particular indications. If an approval is for a limited indication, this limitation reduces the size of the potential market for that product. Product approvals, once granted, may be withdrawn if problems occur after initial marketing. Failure to comply with applicable FDA and other regulatory requirements can result in, among other things, warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal of the government to renew marketing applications and criminal prosecution.

We will not generate further product sales revenue from Quilvax-FELV.

      To date, we have generated product sales revenue from only one product, a feline leukemia vaccine, the manufacturing rights to which we sold in March 2004 to Virbac, S.A., our former marketing partner. Prior to the sale, our revenues from the feline leukemia vaccine for the six months ended June 30, 2004 and the years ended December 31, 2003, 2002, and 2001 were $0.3 million, $3.5 million, $2.6 million, $1.6 million, respectively. We no longer sell that product.

Our business development efforts to partner Oncophage, our most advanced product candidate, are in early stages and may not result in any significant collaboration agreements.

      We are engaged in efforts to partner Oncophage, our most advanced product candidate, with a pharmaceutical or larger biotech company to assist us with the global commercialization of Oncophage. While we have been pursuing these business development efforts for several years, we have not negotiated a definitive agreement relating to the potential commercialization of Oncophage. Many larger companies may be unwilling to commit to a substantial agreement prior to receipt of additional clinical data or, in the absence of such data, may demand economic terms that are unfavorable to us. Even if Oncophage generates favorable clinical data, we may not be able to negotiate a transaction that provides us with favorable economic terms. While some other biotechnology companies have negotiated large collaborations, we may not be able to negotiate any agreements with terms that replicate the terms negotiated by those other companies. We may not, for example, obtain significant upfront payments or substantial royalty rates. Some larger companies are skeptical of the commercial potential and profitability of a personalized product candidate like Oncophage.

We may not receive significant payments from collaborators due to unsuccessful results in existing collaborations or failure to enter into future collaborations.

      Part of our strategy is to develop and commercialize some of our product candidates by continuing our existing arrangements with academic and corporate collaborators and licensees and by entering into new collaborations. Our success depends on our ability to negotiate such agreements and on the success of the other parties in performing research, preclinical and clinical testing. Our collaborations involving QS-21, for example, depend on our licensees successfully completing clinical trials and obtaining regulatory approvals. These activities frequently fail to produce marketable products. For example, in March 2002, Elan Corporation and Wyeth Ayerst Laboratories announced a decision to permanently cease dosing patients in their Phase 2A clinical trial of their AN-1792 Alzheimer’s vaccine containing our QS-21 adjuvant. Several of our agreements also require us to transfer important rights to our collaborators and licensees. As a result of collaborative agreements, we will not completely control the nature, timing, or cost of bringing these products to market. These collaborators and licensees could choose not to devote resources to these arrangements or, under certain circumstances, may terminate these arrangements early. They may cease pursuing the programs or elect to collaborate with different companies. In addition, these

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collaborators and licensees, outside of their arrangements with us, may develop technologies or products that are competitive with those that we are developing. From time to time we may also become involved in disputes with our collaborators. As a result of these factors, our strategic collaborations may not yield revenues. In addition, we may be unable to enter into new collaborations or enter into new collaborations on favorable terms. Failure to generate significant revenue from collaborations would increase our need to fund our operations through sales of equity.

If we are unable to purify heat shock proteins from some cancer types, we may have difficulty successfully completing our clinical trials and, even if we do successfully complete our clinical trials, the size of our potential market would decrease.

      Heat shock proteins occur naturally in the human body and have the potential to activate powerful cellular immune responses. Our ability to successfully develop and commercialize Oncophage or AG-858 for a particular cancer type depends on our ability to purify heat shock proteins from that type of cancer. If we experience difficulties in purifying heat shock proteins for a sufficiently large number of patients in our clinical trials, including our Phase 3 clinical trials, it may lower the probability of a successful analysis of the data from these trials. Our overall manufacturing success rate to date for our Phase 3 trial, C-100-12, in renal cell carcinoma is 92%; for our Phase 3 trial in metastatic melanoma, C-100-21, it is 69%. Our inability to manufacture adequate amounts of Oncophage for approximately 31% of the patients randomized to date in the Oncophage treatment arm of the melanoma trial may jeopardize the potential for the trial, as currently designed, to meet its pre-specified clinical endpoints. We are currently addressing the lower manufacturing success rate for melanoma and expect to implement changes during the third quarter to improve the manufacturing success rate in this trial. We are also evaluating whether or not changes should be made to the design, enrollment target, or planned conclusion of C-100-21. If such changes are required, it will substantially delay our efforts to file a BLA for Oncophage in melanoma.

      Based on our completed earlier clinical trials and our ongoing clinical trials conducted in renal cell carcinoma (including our C-100-12 trial), we have been able to manufacture Oncophage from 93% of the tumors delivered to our manufacturing facility; for melanoma (including our C-100-21 trial), 78%; for colorectal cancer, 98%; for gastric cancer, 81%; for lymphoma, 89%; and for pancreatic cancer, 46%. The relatively low rate for pancreatic cancer is due to the abundance of proteases in pancreatic tissue. Proteases are enzymes that break down proteins. These proteases may degrade the heat shock proteins during the purification process. We have made process development advances that have improved the manufacture of Oncophage from pancreatic tissue. In an expanded Phase 1 pancreatic cancer study, Oncophage was manufactured from five of five tumor samples (100%), bringing the aggregate success rate for this cancer type, which was previously 30%, to 46%. We have successfully manufactured AG-858 from approximately 81% of the patient samples received.

      We may encounter problems with other types of cancers as we expand our research. If we cannot overcome these problems, the number of cancer types that Oncophage could treat would be limited. In addition, if we commercialize Oncophage, we may face claims from patients for whom we are unable to produce a vaccine.

If we fail to sustain and further build our intellectual property rights, competitors will be able to take advantage of our research and development efforts to develop competing products.

      If we are not able to protect our proprietary technology, trade secrets, and know-how, our competitors may use our inventions to develop competing products. We currently have exclusive rights to at least 69 issued U.S. patents and 97 foreign patents. We also have rights to at least 44 pending U.S. patent applications and 145 pending foreign patent applications. However, our patents may not protect us against our competitors. The standards which the United States Patent and Trademark Office uses to grant patents, and the standards which courts use to interpret patents, are not always applied predictably or uniformly and can change, particularly as new technologies develop. Consequently, the level of protection, if any, that will be provided by our patents if we attempt to enforce them, and they are challenged, is uncertain. In addition, the type and extent of patent claims that will be issued to us in the future is

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uncertain. Any patents that are issued may not contain claims that permit us to stop competitors from using similar technology.

      In addition to our patented technology, we also rely on unpatented technology, trade secrets, and confidential information. We may not be able to effectively protect our rights to this technology or information. Other parties may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We generally require each of our employees, consultants, collaborators, and certain contractors to execute a confidentiality agreement at the commencement of an employment, consulting, collaborative, or contractual relationship with us. However, these agreements may not provide effective protection of our technology or information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights, and we may be unable to protect our rights to, or use, our technology.

      If we choose to go to court to stop someone else from using the inventions claimed in our patents, that individual or company has the right to ask a court to rule that our patents are invalid and should not be enforced against that third party. These lawsuits are expensive and would consume time and other resources even if we were successful in stopping the infringement of our patents. In addition, there is a risk that the court will decide that our patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of our patents is upheld, the court will refuse to stop the other party on the grounds that such other party’s activities do not infringe our patents.

      Furthermore, a third party may claim that we are using inventions covered by such third party’s patents or other intellectual property rights and may go to court to stop us from engaging in our normal operations and activities. These lawsuits are expensive and would consume time and other resources. There is a risk that a court would decide that we are infringing the third party’s patents and would order us to stop the activities covered by the patents. In addition, there is a risk that a court will order us to pay the other party substantial damages for having violated the other party’s patents. The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. We know of patents issued to third parties relating to heat shock proteins and alleviation of symptoms of cancer, respectively. We have reviewed these patents, and we believe, as to each claim in those patents, that we either do not infringe the claim of the patents or that the claim is invalid. Moreover, patent holders sometimes send communications to a number of companies in related fields, suggesting possible infringement, and we, like a number of biotechnology companies, have received this type of communication, including with respect to the third-party patents mentioned above. If we are sued for patent infringement, we would need to demonstrate that our products either do not infringe the patent claims of the relevant patent and/or that the patent claims are invalid, which we may not be able to do. Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Additionally, two of the patent applications licensed to us contain claims that are substantially the same as claims in a third-party patent relating to heat shock proteins. We will ask the United States Patent and Trademark Office to declare an interference with this third-party patent, U.S. Patent No. 6,713,608. We believe that the invention of U.S. Patent No. 6,713,608 is the same as that of earlier-filed U.S. Patents No. 5,747,332, 6,066,716, and 6,433,141, which we believe are owned by the same third party, and which were involved in a previous interference proceeding with one of those two applications. During that interference proceeding, we were awarded priority based upon our earlier effective filing date. Accordingly, we believe that the United States Patent and Trademark Office should declare an interference between our pending patent applications and this latest third-party patent and that the claims of U.S. Patent No. 6,713,608 should be deemed invalid. Although we believe that we should prevail against this third-party patent in an interference proceeding, there is no guarantee that will be the outcome.

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      Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to enter into collaborations with other entities.

If we fail to maintain positive relationships with particular individuals, we may be unable to successfully develop our product candidates, conduct clinical trials and obtain financing.

      Pramod K. Srivastava, Ph.D., a member of our board of directors, the chairman of our scientific advisory board, and a consultant to us, and Garo H. Armen, Ph.D., the chairman of our board of directors and our chief executive officer, who together founded Antigenics in 1994, have been, and continue to be, integral to building the company and developing our technology. If either of these individuals decreases his contributions to the company, our business could be adversely impacted.

      Dr. Srivastava is not an employee of Antigenics and has other professional commitments. We sponsor research in Dr. Srivastava’s laboratory at the University of Connecticut Health Center in exchange for the right to license discoveries made in that laboratory with our funding. Dr. Srivastava is a member of the faculty of the University of Connecticut School of Medicine. The regulations and policies of the University of Connecticut Health Center govern the relationship between a faculty member and a commercial enterprise. These regulations and policies prohibit Dr. Srivastava from becoming our employee. Furthermore, the University of Connecticut may modify these regulations and policies in the future to further limit Dr. Srivastava’s relationship with us. Dr. Srivastava has a consulting agreement with Antigenics, which includes financial incentives for him to remain associated with us, but these may not prove sufficient to prevent him from severing his relationship with Antigenics, even during the time covered by the consulting agreement. In addition, this agreement does not restrict Dr. Srivastava’s ability to compete against us after his association with Antigenics is terminated. This agreement expires in March 2005 but will be automatically extended for additional one-year periods unless either party decides not to extend the agreement. If Dr. Srivastava were to terminate his affiliation with us or devote less effort to advancing our technologies, we may not have access to future discoveries that could advance our technologies. We do not have an employment agreement with Dr. Armen. In addition, we do not carry key employee insurance policies for Dr. Armen or any other employee.

      We also rely greatly on employing and retaining other highly trained and experienced senior management and scientific personnel. Since our manufacturing process is unique, our manufacturing and quality control personnel are very important. The competition for these and other qualified personnel in the biotechnology field is intense. If we are not able to attract and retain qualified scientific, technical and managerial personnel, we probably will be unable to achieve our business objectives.

We face litigation that could result in substantial damages and may divert management’s time and attention from our business.

      Antigenics, our chairman and chief executive officer, Garo H. Armen, Ph.D., and two brokerage firms that served as underwriters in our initial public offering have been named as defendants in a federal civil class action lawsuit. We have submitted settlement papers with the Federal District Court for the Southern District of New York; however, a failure to finalize a settlement could require us to pay substantial damages. Regardless of the outcome, participation in a lawsuit may cause a diversion of our management’s time and attention from our business. In addition, we are involved in other litigation, and may become involved in additional litigation, with former employees, our commercial partners, and others. Any such litigation could be expensive in terms of out-of-pocket costs and management time, and the outcome of any such litigation will be uncertain.

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If we fail to obtain adequate levels of reimbursement for our product candidates from third-party payers, the commercial potential of our product candidates will be significantly limited.

      Our profitability will depend on the extent to which government authorities, private health insurance providers and other organizations provide reimbursement for the cost of our product candidates. Many patients will not be capable of paying for our product candidates themselves. A primary trend in the United States health care industry is toward cost containment. Large private payers, managed care organizations, group purchasing organizations, and similar organizations are exerting increasing influence on decisions regarding the use of particular treatments. Furthermore, many third-party payers limit reimbursement for newly approved health care products. Cost containment measures may prevent us from becoming profitable.

      It is not clear that public and private insurance programs will determine that Oncophage or our other product candidates come within a category of items and services covered by their insurance plans. For example, although the federal Medicare program covers drugs and biological products, the program takes the position that the FDA’s treatment of a product as a drug or biologic does not require the Medicare program to treat the product in the same manner. Accordingly, it is possible that the Medicare program will not cover Oncophage or our other product candidates if they are approved for commercialization. It is also possible that there will be substantial delays in obtaining coverage of Oncophage or our other product candidates and that, if coverage is obtained, there may be significant restrictions on the circumstances in which there would be reimbursement. Where insurance coverage is available, there may be limits on the payment amount. Congress and the Medicare program periodically propose significant reductions in the Medicare reimbursement amounts for drugs and biologics. Such reductions could have a material adverse effect on sales of any of our product candidates that receive marketing approval. In December 2003, the President of the United States signed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The future impact of this legislation on our product candidates is uncertain. Effective January 1, 2004, Medicare payments for many drugs administered in physician’s offices were reduced significantly. This provision impacts many drugs used in cancer treatment by oncologists and urologists. The payment methodology changes in future years, and it is unclear how the payment methodology will impact reimbursement for Oncophage, if it receives regulatory approval, and incentives for physicians to recommend Oncophage relative to alternative therapies.

Product liability and other claims against us may reduce demand for our products or result in substantial damages.

      We face an inherent risk of product liability exposure related to testing our product candidates in human clinical trials and will face even greater risks if we sell our product candidates commercially. An individual may bring a product liability claim against us if one of our product candidates causes, or merely appears to have caused, an injury. Product liability claims may result in:

•  decreased demand for our product candidates;

•  injury to our reputation;

•  withdrawal of clinical trial volunteers;

•  costs of related litigation; and

•  substantial monetary awards to plaintiffs.

      We manufacture Oncophage and AG-858 from a patient’s cancer cells, and a medical professional must inject Oncophage or AG-858 into that same patient. A patient may sue us if we, a hospital, or a delivery company fails to deliver the removed cancer tissue or that patient’s Oncophage or AG-858. We anticipate that the logistics of shipping will become more complex if the number of patients we treat increases, and it is possible that all shipments will not be made without incident. In addition, administration of Oncophage or AG-858 at a hospital poses risk of delivery to the wrong patient. Currently, we do not have insurance that covers loss of or damage to Oncophage or AG-858, and we do

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not know whether insurance will be available to us at a reasonable price or at all. We have limited product liability coverage for clinical research use of product candidates. Our product liability policy provides $10 million aggregate coverage and $10 million per occurrence. This limited insurance coverage may be insufficient to fully compensate us for future claims.

We may incur significant costs complying with environmental laws and regulations.

      We use hazardous, infectious, and radioactive materials in our operations, which have the potential of being harmful to human health and safety or the environment. We store these hazardous (flammable, corrosive, toxic), infectious, and radioactive materials, and various wastes resulting from their use, at our facilities pending use and ultimate disposal. We are subject to a variety of federal, state and local laws and regulations governing use, generation, storage, handling, and disposal of these materials. We may incur significant costs complying with both current and future environmental health and safety laws and regulations. In particular, we are subject to regulation by the Occupational Safety and Health Administration, the Environmental Protection Agency, the Drug Enforcement Agency, the Department of Transportation, the Centers for Disease Control and Prevention, the National Institutes of Health, the International Air Transportation Association, and various state and local agencies. At any time, one or more of the aforementioned agencies could adopt regulations that may affect our operations. We are also subject to regulation under the Toxic Substances Control Act and the Resource Conservation Development programs.

      Although we believe that our current procedures and programs for handling, storage, and disposal of these materials comply with federal, state, and local laws and regulations, we cannot eliminate the risk of accidents involving contamination from these materials. Although we have limited pollution liability coverage ($2 million) and a workers’ compensation liability policy, in the event of an accident or accidental release, we could be held liable for resulting damages, which could be substantially in excess of any available insurance coverage and could substantially disrupt our business.

Our competitors in the biotechnology and pharmaceutical industries may have superior products, manufacturing capability or marketing expertise.

      Our business may fail because we face intense competition from major pharmaceutical companies and specialized biotechnology companies engaged in the development of product candidates and other therapeutic products, including heat shock proteins directed at cancer, infectious diseases, autoimmune disorders, and degenerative disorders. Several of these companies have products that utilize similar technologies and/or personalized medicine techniques, such as CancerVax’s Canvaxin, Dendreon’s Provenge and Mylovenge, Stressgen’s HspE7, AVAX’s M-Vax and O-Vax, Intracel’s OncoVax, and Cell Genesys’ GVAX vaccines. Additionally, many of our competitors, including large pharmaceutical companies, have greater financial and human resources and more experience than we do. Our competitors may:

•  commercialize their products sooner than we commercialize our own;

•  develop safer or more effective therapeutic drugs or preventive vaccines and other therapeutic products;

•  implement more effective approaches to sales and marketing;

•  establish superior intellectual property positions; or

•  discover technologies that may result in medical insights or breakthroughs which render our drugs or vaccines obsolete, possibly before they generate any revenue.

More specifically, if we receive regulatory approvals, some of our product candidates will compete with well-established, FDA-approved therapies such as interleukin-2 and interferon-alpha for renal cell carcinoma and melanoma, which have generated substantial sales over a number of years. We anticipate

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that we will face increased competition in the future as new companies enter markets we seek to address and scientific developments surrounding immunotherapy and other cancer therapies continue to accelerate.

Risks Related to our Common Stock

Our officers and directors may be able to block proposals for a change in control.

      Antigenics Holdings L.L.C. is a holding company that owns shares of our common stock and as of June 30, 2004, Antigenics Holdings L.L.C. controlled approximately 25% of our outstanding common stock. Due to this concentration of ownership, Antigenics Holdings L.L.C. may be able to prevail on all matters requiring a stockholder vote, including:

•  the election of directors;

•  the amendment of our organizational documents; or

•  the approval of a merger, sale of assets, or other major corporate transaction.

      Certain of our directors and officers directly and indirectly own approximately 74% of Antigenics Holdings L.L.C. and, if they elect to act together, can control Antigenics Holdings L.L.C. In addition, several of our directors and officers directly and indirectly own approximately 4% of our outstanding common stock.

A single, otherwise unaffiliated, stockholder holds a substantial percentage of our outstanding capital stock.

      According to publicly filed documents, Mr. Brad M. Kelley beneficially owns 5,546,240 shares of our outstanding common stock and 31,620 shares of our Series A convertible preferred stock. The shares of preferred stock are currently convertible at any time into 2,000,000 shares of common stock at an initial conversion price of $15.81. If Mr. Kelley had converted all of the shares of preferred stock on June 30, 2004, he would have held approximately 16% of our outstanding common stock. We currently have a right of first refusal agreement with Mr. Kelley that provides us with limited rights to purchase certain of Mr. Kelley’s shares if he proposes to sell them to a third party.

      Mr. Kelley’s substantial ownership position provides him with the ability to substantially influence the outcome of matters submitted to our stockholders for approval. Furthermore, collectively, Mr. Kelley and Antigenics Holdings L.L.C. control approximately 37% of our outstanding common stock, providing substantial ability, if they vote in the same manner, to determine the outcome of matters submitted to a stockholder vote. If Mr. Kelley were to convert all of his preferred stock into common stock, the combined percentage would increase to 41%. Additional purchases of our common stock by Mr. Kelley also would increase both his own percentage of outstanding voting rights and the percentage combined with Antigenics Holdings L.L.C. (Mr. Kelley’s shares of preferred stock do not carry voting rights; the common stock issuable upon conversion, however, carries the same voting rights as other shares of common stock.)

Provisions in our organizational documents could prevent or frustrate attempts by stockholders to replace our current management.

      Our certificate of incorporation and bylaws contain provisions that could make it more difficult for a third party to acquire us without consent of our board of directors. Our certificate of incorporation provides for a staggered board and removal of directors only for cause. Accordingly, stockholders may elect only a minority of our board at any annual meeting, which may have the effect of delaying or preventing changes in management. In addition, under our certificate of incorporation, our board of directors may issue shares of preferred stock and determine the terms of those shares of stock without any further action by our stockholders. Our issuance of preferred stock could make it more difficult for a third party to acquire a majority of our outstanding voting stock and thereby effect a change in the composition of our board of directors. Our certificate of incorporation also provides that our stockholders may not take action by written consent. Our bylaws require advance notice of stockholder proposals and nominations, and permit only our president or a majority of the board of directors to call a special stockholder meeting. These

27

provisions may have the effect of preventing or hindering attempts by our stockholders to replace our current management. In addition, Delaware law prohibits a corporation from engaging in a business combination with any holder of 15% or more of its capital stock until the holder has held the stock for three years unless, among other possibilities, the board of directors approves the transaction. The board may use this provision to prevent changes in our management. Also, under applicable Delaware law, our board of directors may adopt additional anti-takeover measures in the future.

Our stock has low trading volume and its public trading price has been volatile.

      Between our initial public offering on February 4, 2000 and August 2, 2004, the closing price of our common stock has fluctuated between $6.86 and $52.63 per share, with an average daily trading volume for the six months ended June 30, 2004 of approximately 518,000 shares. The market has experienced significant price and volume fluctuations that are often unrelated to the operating performance of individual companies. In addition to general market volatility, many factors may have a significant adverse effect on the market price of our stock, including:

•  announcements of decisions made by public officials;

•  results of our preclinical and clinical trials;

•  announcements of technological innovations or new commercial products by us or our competitors;

•  developments concerning proprietary rights, including patent and litigation matters;

•  publicity regarding actual or potential results with respect to products under development by us or by our competitors;

•  regulatory developments; and

•  quarterly fluctuations in our financial results.

The sale of a significant number of shares could cause the market price of our stock to decline.

      The sale by us or the resale by stockholders of a significant number of shares of our common stock could cause the market price of our common stock to decline. As of June 30, 2004, we had approximately 45,088,000 shares of common stock outstanding. All of these shares are eligible for sale on the NASDAQ National Market, although certain of the shares are subject to sales volume and other limitations.

      We have filed registration statements to permit the sale of 10,436,831 shares of common stock under our equity incentive plan, and certain equity plans that we assumed in the acquisitions of Aquila Biopharmaceuticals, Inc. and Aronex Pharmaceuticals, Inc. We have also filed a registration statement to permit the sale of 300,000 shares of common stock under our employee stock purchase plan. We have also filed a registration statement to permit the sale of 100,000 shares of common stock under our directors’ deferred compensation plan. As of June 30, 2004, options to purchase approximately 5,125,000 shares of our common stock upon exercise of options with a weighted average exercise price per share of $9.79 were outstanding. Many of these options are subject to vesting that generally occurs over a period of up to five years following the date of grant. As of June 30, 2004, warrants to purchase approximately 92,000 shares of our common stock with a weighted average exercise price per share of $40.69 were outstanding. We have also filed a registration statement to permit the sale of our common stock, preferred stock and debt securities, which we may sell separately or together at any time in any combination, in an aggregate amount of up to $100 million. The 5,400,000 common shares sold during February 2004 were sold pursuant to that registration statement, thereby reducing the aggregate amount of securities we may sell pursuant to that registration statement to $43.3 million.

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Critical Accounting Policies and Use of Estimates

      The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

      The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base those estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

      The following listing is not intended to be a comprehensive list of all of our accounting policies. Our significant accounting policies are described in Note 2 to our consolidated financial statements included in our Form 10-K for the year ended December 31, 2003 filed with the SEC. In many cases, the accounting treatment of a particular transaction is dictated by accounting principles generally accepted in the United States of America, with no need for our judgment in their application. There are also areas in which our judgment in selecting an available alternative would not produce a materially different result. We have identified the following as our critical accounting policies:

     Research and Development

      Research and development expenses include the costs associated with our internal research and development activities including salaries and benefits, occupancy costs, clinical manufacturing costs, related administrative costs, and research and development conducted for us by outside entities, such as sponsored university-based research partners and clinical research organizations. We account for our clinical study costs by estimating the total cost to treat a patient in each clinical trial and recognizing this cost as we estimate when the patient receives treatment, beginning when the patient enrolls in the trial. This estimated cost includes payments to the trial site and patient-related costs, including lab costs, related to the conduct of the trial. Cost per patient varies based on the type of clinical trial, the site of the clinical trial, and the length of the treatment period for each patient. As we become aware of the actual costs, we adjust our accrual; such changes in estimates may be a material change in our clinical study accrual, which could also materially affect our results of operations. Research and development costs are expensed as incurred and were $21,825,000, $48,527,000, $39,983,000 and $31,357,000 for the six months ended June 30, 2004, and the years ended December 31, 2003, 2002, and 2001, respectively.

     Investments

      We classify investments in marketable securities at the time of purchase. At June 30, 2004, all marketable securities were classified as available-for-sale and as such, changes in fair value are reported as a separate component of accumulated other comprehensive income (loss) until realized. If we were to classify future investments as trading securities rather than available-for-sale, our financial results would be subject to greater volatility. If declines in the fair value of available-for-sale securities are determined to be other than temporary, accumulated other comprehensive income is reduced and the impairment is charged to operations. Investments of less than 20% of the voting control of entities over whose operating and financial policies we do not have the power to exercise significant influence are accounted for by the cost method. We currently account for our investment in AGTC under the cost method and, as of June 30, 2004, we have included it in non-current other assets on the consolidated balance sheet, as more fully disclosed in Note G to our consolidated financial statements included in this report. The general partner of AGTC determines the timing of our additional contributions. Our investment represents an approximate ownership of 2%. We continue to assess the realizability of this investment. In order to assess whether or not there has been an other than temporary decline in the value of this investment, we analyze several factors including: (1) the carrying value of the limited partnership’s investments in its portfolio companies, (2) how recently the investments in the portfolio companies had been made, (3) the post-financing

29

valuations of those investments, (4) the level of un-invested capital held by the limited partnership, and (5) the overall trend in venture capital valuations. Based on this analysis, during the six months ended June 30, 2004, we concluded that an other than temporary decline has not occurred. Our investment balance aggregated $1,557,000 at June 30, 2004.

                  Revenue Recognition

      Revenue from product sales is recognized at the time of product shipment. Revenue for services under research and development grants and contracts are recognized as the services are performed, milestones are achieved, or clinical trial materials are provided.

                  Stock Option Accounting

      We account for options granted to employees and directors in accordance with Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense is recorded on fixed stock option grants only if the current fair value of the underlying stock exceeds the exercise price of the option at the date of grant in which case it is recognized on a straight-line basis over the vesting period. We account for stock options granted to non-employees on a fair-value basis in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation and Emerging Issues Task Force Issue (“EITF’) No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. As a result, the non-cash charge to operations for non-employee options with vesting or other performance criteria is affected each reporting period by changes in the fair value of our common stock. As required, we also provide pro forma net loss attributable to common stockholders and pro forma net loss attributable to common stockholders per common share disclosures for employee and director stock option grants as if the fair-value-based method defined in SFAS No. 123 had been applied (see Note E to our unaudited consolidated financial statements included in this report).

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

      In the normal course of business, we are exposed to fluctuations in interest rates as we seek debt financing to make capital expenditures, and foreign currency exchange risk related to our transactions denominated in foreign currencies. We do not employ specific strategies, such as the use of derivative instruments or hedging, to manage these exposures. Our currency exposures vary, but are primarily concentrated in the Euro. Since the fiscal year ended December 31, 2003, there has been no material change with respect to our interest rate and foreign currency exposures or our approach toward those exposures. Further, we do not expect our market risk exposures to change in the near term.

      We had cash equivalents and short-term investments at June 30, 2004 of approximately $117 million, which are exposed to the impact of interest rate changes and our interest income fluctuates as our interest rate changes. Due to the short-term nature of our investments in money market funds, corporate debt securities, taxable auction preferreds, and government-backed securities, our carrying value approximates the fair value of these investments at June 30, 2004, however, we are subject to investment risk.

      We maintain an investment portfolio in accordance with our Investment Policy. The primary objectives of our Investment Policy are to preserve principal, maintain proper liquidity to meet operating needs, and maximize yields. Although our investments are subject to credit risk, our Investment Policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer, or type of investment. Our investments are also subject to interest rate risk and will decrease in value if market interest rates increase. However, due to the conservative nature of our investments and relatively short duration, interest rate risk is mitigated. We do not own derivative financial instruments in our investment portfolio.

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Item 4 — Controls and Procedures

      We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (who at the end of the period functioned as our principal financial officer) of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures are effective in providing reasonable assurance of timely communication to management of material information.

      During the second quarter of 2004, there was no change in our internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION

Item 1 — Legal Proceedings

      Antigenics, our Chairman and Chief Executive Officer Garo Armen, and two investment banking firms that served as underwriters in our initial public offering have been named as defendants in a civil class action lawsuit filed on November 5, 2001 in the Federal District Court for the Southern District of New York on behalf of a class of purchasers of our stock between February 3, 2000 and December 6, 2000. Similar complaints were filed against about 300 other issuers, their underwriters, and in many instances their directors and officers. These cases have been coordinated under the caption In re Initial Public Offering Securities Litigation, Civ. No. 21 MC 92 (SAS), by order dated August 9, 2001. The suit against Antigenics and Dr. Armen alleges that the brokerage arms of the investment banking firms charged secret excessive commissions to certain of their customers in return for allocations of our stock in the offering. The suit also alleges that shares of our stock were allocated to certain of the investment banking firms’ customers based upon agreements by such customers to purchase additional shares of our stock in the secondary market. The complaint alleges that Antigenics is liable under Section 11 of the Securities Act of 1933, as amended (the Securities Act), and Dr. Armen is liable under Sections 11 and 15 of the Securities Act because our registration statement did not disclose these alleged practices. On April 19, 2002, the plaintiffs in this action filed an amended class action complaint, which contains new allegations. Similar amended complaints were filed with respect to about 300 companies. In addition to the claims in the earlier complaint, the amended complaint alleges that Antigenics and Dr. Armen violated Sections 10(b) and 20 of the Securities Exchange Act and SEC Rule 10b-5 by making false and misleading statements and/or omissions in order to inflate our stock price and conceal the investment banking firms’ alleged secret arrangements. The claims against Dr. Armen, in his individual capacity, have been dismissed without prejudice. On July 15, 2002, Antigenics and Dr. Armen joined the Issuer Defendants’ Motion to Dismiss the Consolidated Amended Complaints. By order of the Court, this motion set forth all “common issues,” i.e., all grounds for dismissal common to all or a significant number of Issuer Defendants. The hearing on the Issuer Defendant’s Motion to Dismiss and the other Defendants’ motions to Dismiss was held on November 1, 2002. On February 19, 2003, the Court issued its opinion and order on the Issuer Defendants’ Motion to Dismiss. The Court granted Antigenics’ motion to dismiss the Rule 10b-5 and Section 20 claims with leave to amend and denied our motion to dismiss the Section 11 and Section 15 claims. On June 14, 2004, papers formalizing a proposed settlement among the plaintiffs, issuer defendants, and issuers were presented to the Federal District Court for the Southern District of New York, and Antigenics anticipates that a settlement will be reached without incurring significant out-of-pocket costs. At this time, we cannot make a reliable estimate of possible loss, if any, related to this litigation.

      On February 11, 2003, we filed a complaint for undisclosed damages in the Federal District Court in the Southern District of New York against U.S. Bancorp Piper Jaffray for breach of fiduciary duty and breach of contract, and against Scott Beardsley and Peter Ginsburg for libel and intentional interference

31

with economic relations in connection with our January 2002 follow-on stock offering. The suit alleges that, in retaliation for not being named lead underwriter of the follow-on offering, U.S. Bancorp Piper Jaffray dropped its research coverage and Peter Ginsburg and Scott Beardsley made false and defamatory statements about Antigenics with the purpose of harming our reputation and interfering with the follow-on stock offering. As part of its regulatory focus on investment banking and research analyst conflicts, the National Association of Securities Dealers (NASD) found that Scott Beardsley threatened to discontinue research coverage and stop making a market in our stock if we did not select U.S. Bancorp Piper Jaffray as lead underwriter for the secondary offering. As part of a settlement with NASD, US Bancorp Piper Jaffray and Scott Beardsley were censured and fined $250,000 and $50,000, respectively. The defendants moved to dismiss all claims against them pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure. The court dismissed our Federal law claims and declined to address our state law claims on jurisdictional grounds. Antigenics served an amended complaint and Rule 60(b) motion on June 7, 2004 and added three new individual defendants to the already named Scott Beardsley and Peter Ginsberg: Addison Piper, Andrew S. Duff and Thomas Schnettler. Piper Jaffray and Scott Beardsley filed their opposition to the motion on June 23, 2004. Antigenics’ reply papers maintaining its position were filed within the appropriate time period.

      On February 19, 2004, Jonathan Lewis, M.D., our former Chief Medical Officer, filed a complaint against us in the United States District Court for the Southern District of New York. The suit alleges that we terminated Dr. Lewis without cause and have failed to pay severance benefits to which Dr. Lewis believes he is entitled. The complaint seeks relief for breach of contract and intentional infliction of emotional distress. Dr. Lewis is seeking damages in excess of $2 million. Discovery in this matter is ongoing and is presently scheduled to end in October 2004. A settlement conference is scheduled with the court in October as well. We intend to defend against these claims and as we do not believe a loss is probable, no reserve has been recorded.

      We currently are a party to other legal proceedings as well. While our management currently believes that the ultimate outcome of any of these proceedings will not have a material adverse effect on our consolidated financial position, results of operations, or liquidity, litigation is subject to inherent uncertainty. However, litigation is subject to inherent uncertainty and consumes both cash and management attention.

Item 4 — Submission of Matters to a Vote of Security Holders

      At the Annual Meeting of Shareholders held on May 26, 2004, Antigenics’ shareholders voted as follows:

      To elect the following nominees to the Board of Directors:

			Total Vote
Nominee	Total Vote “FOR”		“WITHHELD”
Noubar Afeyan		41,755,914		627,135
Frank V. AtLee III		41,755,970		627,079
Pramod Srivastava		41,819,112		563,937

      All received a plurality of the votes cast by stockholders entitled to vote thereon and, therefore, Dr. Afeyan, Mr. AtLee, and Dr. Srivastava were elected to the Board of Directors for a term of three years. In addition, the terms in office of Dr. Armen, Mr. De Chadarevian, Mr. Dechaene, Ms. Eisen, Mr. Jordan, and Mr. Kessel, continued after the meeting.

      To amend the Antigenics Inc. 1999 Equity Incentive Plan to increase the number of shares of the Company’s Common Stock available under the plan from 6,000,000 to 10,000,000:

Total Vote “FOR”	Total Vote “AGAINST”	Total Vote “ABSTAIN”
22,168,470	3,852,295	461,472

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Item 6 — Exhibits and Reports on Form 8-K

      (a) Exhibits

Exhibit 10.1	Employment Agreement dated June 21, 2004 between Antigenics Therapeutics Limited and Peter Thornton
Exhibit 31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

      (b) Current Reports on Form 8-K

      The following Forms 8-K were filed with or furnished to the SEC:

      On April 1, 2004, we filed a Current Report on Form 8-K, pursuant to which we announced the sale our manufacturing rights for feline leukemia virus (FeLV) vaccine and filed agreements related to that transaction.

      On April 20, 2004, we furnished a Current Report on Form 8-K, pursuant to which we furnished our press release dated April 20, 2004 announcing our financial results for the quarter ended March 31, 2004.

      On May 27, 2004, we filed a Current Report on Form 8-K, pursuant to which we filed (1) a Right of First Refusal dated as of May 21, 2004, between Antigenics Inc. and Brad M. Kelley and (2) an amendment to our 1999 Equity Incentive Plan increasing the shares available under the plan to 10,000,000 from 6,000,000.

      On July 22, 2004, we furnished a Current Report on Form 8-K, pursuant to which we furnished our press release dated July 22, 2004 announcing our financial results for the quarter ended June 30, 2004.

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ANTIGENICS INC.

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ANTIGENICS INC.

/s/ GARO H. ARMEN

_______________________________________
Garo H. Armen Ph.D.,

Chairman and Chief Executive Officer

(Principal Accounting Officer)

Date: August 9, 2004

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EXHIBIT INDEX

Exhibit No.	Description
Exhibit 10.1	Employment Agreement dated June 21, 2004 between Antigenics Therapeutics Limited and Peter Thornton
Exhibit 31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-10.1

                                                                    CONFIDENTIAL

                                                                    Exhibit 10.1

This Agreement is dated June 21, 2004 and is made between Antigenics
Therapeutics Limited having its registered offices at 25/28 North Wall Quay,
Dublin 1 Registered No. 381308 ("The Company") and Peter Thornton of Dublin,
Ireland ("Chief Financial Officer")

IT IS HEREBY AGREED as follows:

1.    EMPLOYMENT

      The Chief Financial Officer shall be employed by the Company under a Fixed
      Term Contract, and such employment shall be upon the terms and subject to
      the conditions hereinafter appearing.

2.    DUTIES AND RESPONSIBILITIES

2.1.  The Chief Financial Officer is hereby being employed to serve the Company
      as its Sr. Vice President and Chief Financial Officer, and shall perform
      the duties and be entitled to exercise the powers with respect to the
      Company, which are from time to time assigned to him or vested in him,
      whether or not such duties shall be of a nature normally performed by an
      employee holding the positions of the Sr. Vice President or the Chief
      Financial Officer. The Chief Financial Officer shall obey all lawful and
      reasonable directions of the Chairman and Chief Executive Officer of
      Antigenics Inc., a Delaware corporation and the parent corporation of the
      Company (the "Chairman"). The Chief Financial Officer shall report
      directly to and will keep the Chairman properly and fully informed (in
      writing if so requested) on a regular basis of his work and provide such
      explanations as may be required.

2.2.  Chief Financial Officer shall, for the remuneration detailed in clause 4,
      unless prevented by illness, devote the whole of his business time and
      attention to his duties, working such hours as may reasonably be required
      to perform his duties hereunder and shall well and faithfully serve and
      use his best endeavours to promote the interests of the Company at all
      times, and shall not knowingly do or omit to do, or permit or suffer
      anything to be done or omitted, to the prejudice, loss or injury of the
      Company.

2.3.  The Chief Financial Officer shall not directly or indirectly receive or
      give gifts, incentives or inducements from or to any person, company or
      firm in the carrying out of any activity in connection with the Company.

3.    DURATION

3.1.  The Chief Financial Officer's employment hereunder with the Company shall
      be for a fixed term and will expire on 1159pm (Easter Standard Time) of
      the day the Chief Financial Officer is granted the work authorization Visa
      H1-B, or such later date as the Company and the Chief Financial Officer
      may agree in writing (the "Employment Expiration"), subject always to the
      provisions for earlier termination hereinafter provided in this Agreement.
      Upon the Employment Expiration, the Chief Financial Officer will then
      relocate to the USA and the Employment Agreement attached in Schedule 1
      hereto will apply

                                       1


                                                                    CONFIDENTIAL

      and be in substitution for this Agreement, which shall be deemed to be
      expired.

3.2.  The Unfair Dismissals Act 1977 - 2001 (as amended) shall not apply to a
      dismissal consisting only of the expiry of the fixed term of this
      Agreement without renewal hereof. In such circumstances, the Chief
      Financial Officer shall not be entitled to continued or alternative
      employment with the Company in any capacity.

4.    REMUNERATION

4.1.  During the term of the Chief Financial Officer's employment hereunder, the
      Company shall pay to the Chief Financial Officer a basic salary of
      $250,000.00 (United States dollars) per annum gross, payable monthly in
      arrear subject to such statutory and other deductions and the net sum
      shall be paid directly into the Chief Financial Officer's nominated bank
      account at the end of each calendar month.

4.2.  During the term of the Chief Financial Officer's employment hereunder, the
      Company shall reimburse the Chief Financial Officer for reasonable travel
      insurance premiums. Such travel insurance shall be maintained in the
      amounts customary for an individual who will be travelling internationally
      on a periodic basis.

4.3.  In the event of the Chief Financial Officer being absent by reason of
      sickness or injury from work or unable to perform his duty under this
      Agreement the Company's policy on sick leave pay will apply subject always
      to the terms and conditions of this Agreement.

5.    ANNUAL HOLIDAYS

5.1.  The Chief Financial Officer is entitled to 20 working days (and prorate
      for any lesser period) to be taken at times to be agreed with the
      Chairman. Public holiday entitlements are in addition to annual holidays.

6.    PLACE OF WORK AND RELOCATION

6.1.  The Employee shall not have a fixed or main place of work but will be
      required to perform his functions under this contract at a variety of
      locations both in Ireland and abroad. He may, on a regular basis, be
      required to attend meetings and undertake other business-related
      activities in such other countries as may from time to time be specified
      by the Company.

7.    CONFIDENTIALITY

7.1   The Chief Financial Officer shall be bound by the Company confidentiality
      policy (as from time to time amended) in all matters and shall not during
      his employment hereunder (save in the proper exercise of his duties) nor
      at any time thereafter utilise for his own purpose or divulge, publish,
      communicate or reveal to any person any information whatsoever concerning
      the business, organisation, finances, dealings, transactions, or affairs
      of the Company and shall use his best endeavours to prevent the disclosure
      of any publication of any such matters by others and shall keep with
      complete secrecy all confidential information entrusted to him, and shall
      not use or attempt to use any such information in any manner which may
      injure or cause loss either directly or indirectly to the Company or their
      businesses or may be likely to do so. For the avoidance of doubt it is
      agreed that the provisions of this

                                       2


                                                                    CONFIDENTIAL

      clause do not apply to any information which is in the public domain
      through no act, neglect or default on the part of the Chief Financial
      Officer.

7.2   Unless otherwise agreed to by the Company, on the expiry of the fixed term
      of this Agreement or earlier termination of the Chief Financial Officer's
      employment, he shall deliver up to the Company all documents, papers,
      notes and other media of any description (including, without limitation
      computer programmes) in his possession or under his control which relate
      in any way to the affairs of the Company or to property in which the
      Company has an interest and shall not retain any copies thereof and the
      Chief Financial Officer's duties of confidentiality shall continue to
      apply after termination of employment.

7.3   The Company may provide the Chief Financial Officer with access to the
      internet and email systems for business use and the Chief Financial
      Officer shall be bound by the Company's internet usage policy, messages
      may be read by IT personnel and while internet activity may not be tracked
      on a continuous basis it may be monitored to ensure that this technology
      is not being used for personal or for other than business purposes save as
      may be allowed in accordance with the Company policy. When passwords are
      used the Company reserves the right to override these for the purposes of
      retrieving information and/or the monitoring of email and/or internet
      usage. When using Company computer systems the Chief Financial Officer is
      required to adhere to the Company's computer security policy and under no
      circumstances may he introduce his own software. The Chief Financial
      Officer may use software developed by the Company or provided by the
      developer to the Company. Copyright of all this software developed within
      the Company by staff or contractors is vested in the Company.

8.    CONFLICT OF INTERESTS

8.1.  During his employment hereunder the Chief Financial Officer shall not
      render advice or services whether solely or jointly with or as a director,
      manager, consultant or agent for any other person directly or indirectly
      carry on or be engaged or be concerned or interested in any activity,
      business, trade or calling other than in the course of his duties
      hereunder, without the prior written consent of the Company

9.    DATA PROTECTOIN

9.1.  The Company may from time to time in the course of administrating need to
      process both personal data (including, for example, any information from
      which you may be identified) any sensitive personal data (including, for
      example, information relating to health) in relation to the Chief
      Financial Officer. The Company will process such data with the then
      applicable data protection legislation. By signing this letter the Chief
      Financial Officer consents to the processing of personal data by the
      Company.

10.   COPYRIGHT

10.1. The Chief Financial Officer shall promptly disclose to the Company all
      copyright works or designs originated, conceived, written or made by him,
      whether alone or with others, relating to the Company provided that same
      originated or were conceived, written or made by him during the fixed term
      of his

                                       3


                                                                    CONFIDENTIAL

      employment and in the course of his work with the Company.

10.2. The Chief Financial Officer hereby assigns to the Company by way of future
      assignment all copyrights, design rights and other similar rights for the
      full terms thereof throughout the world arising in any works or material
      originated, conceived, written or made by him (except only those works or
      designs that the Company is satisfied originated or were conceived,
      written or made by him wholly outside his normal working hours which are
      wholly unconnected with the Company and/or his employment with the
      Company) during the period of his employment by the Company insofar as the
      rights in such works and material do not automatically vest in the Company
      as a result of the employment.

11.   INVENTIONS

11.1. If at any time during the Chief Financial Officer's employment he makes or
      discovers or participates in the discovery of any invention, secret
      process, operational procedure or any improvement upon or addition to any
      invention or any secret process or contrivance or design or appliance or
      method of operation or other intellectual property which is applicable to
      or in any way affects the business for the time being carried on by the
      Company the same will be immediately communicated by him to the Company
      and will, unless the Board otherwise resolves, be the absolute property of
      the Company and at the request and expense of the Company he will give and
      supply all such information, data and drawings as may be needed to enable
      the Company to exploit such invention, improvement or addition to the best
      advantage and will execute all such documents and do all such things as
      may be necessary or desirable for obtaining patent or similar protection
      for the same in such part or parts of the world as may be specified by the
      Company and for vesting the same in the Company.

11.2. The Chief Financial Officer hereby irrevocably appoints the Chairman to be
      his attorney in his name and on his behalf to execute documents, to use
      his name and to do all things which may be necessary or desirable for the
      Company to obtain for itself or its nominee the full benefits of the
      provisions of Clause 11.1 and a certificate in writing signed by any
      member of the Board of the Company that any instrument or act falls within
      the authority hereby conferred shall be conclusive evidence that such is
      the case so far as any third party is concerned.

11.3. The Chief Financial Officer will do nothing (whether by commission or
      omission) during his employment or at any time after the termination of
      his employment to affect or imperil the validity of any intellectual
      property rights obtained, applied for or to be applied for by the Company
      or its nominee. In particular, without limitation he will not disclose the
      subject matter of any invention which may be patentable before the Company
      has had an opportunity to apply for any patent or patents.

12.   PERFORMANCE

      The Chief Financial Officer's performance of his job duties and
      responsibilities with the Company will be reviewed regularly. In the
      course of such reviews the Company will discuss his performance and
      identify strengths and weaknesses. If the Company requires him to improve
      and/or make any adjustments in his performance, these will be communicated
      to him. Should he fail to make adequate improvements, the Company reserves
      the right to take all necessary steps including termination of his
      employment. The

                                       4


                                                                    CONFIDENTIAL

      steps involved in this review process shall be applied fairly and
      reasonably.

13.   GRIEVANCE PROCEDURE

In the event of any dispute or disagreement between the Chief Financial Officer
and the Company in relation to his employment, the Chief Financial Officer
should bring such dispute or disagreement to the attention of the Chairman or
the Vice President of Human Resources in instances where the dispute or
disagreement is with the Chairman, who will endeavour to resolve it.

14.   DISCIPLINARY PROCEDURE

      In the event of any disciplinary issue arising in relation to the Chief
      Financial Officer's conduct or performance during his employment it will
      be dealt with in the following manner:

14.1. the disciplinary issue will be investigated properly by such person or
      persons as the Chairman may nominate for such purpose and during any such
      investigation the Chief Financial Officer may be suspended on full pay
      pending its outcome;

14.2. any allegations made will be communicated to the Chief Financial Officer
      at or (as may be appropriate) prior to a specially convened disciplinary
      meeting and he will be given an opportunity to respond. The Chief
      Financial Officer will be entitled to be accompanied by a fellow staff
      member at that meeting;

14.3. following investigation the Company will decide whether any allegations
      made have been proven and if so what sanction to apply in the
      circumstances. For minor misconduct, sanctions may include a verbal
      warning or a written warning where appropriate. A verbal warning may be
      imposed by the Chairman without convening a disciplinary meeting. For more
      serious misconduct or if the Chief Financial Officer fails, following
      warnings, to improve his performance the Chairman may issue him with a
      final written warning, demote him or terminate his employment. If
      termination is considered to be the appropriate sanction, then this
      Agreement may be terminated in accordance with Clause 15;

14.4. the Chief Financial Officer may appeal against the sanction within five
      (5) days of notification thereof to the lead Director for the time being
      of the Board of the Company (who shall not have been involved in the
      disciplinary procedure prior to the appeal stage).

15.   TERMINATION

15.1  TERMINATION BY NOTICE

      Either party may terminate the Chief Financial Officer's employment
      hereunder at any time prior to the Employment Expiration by giving the
      other party sixty (60) days notice, or in the case of the Company where
      such termination is without cause and solely at the sole election of the
      Company, by the payment of twelve (12) months basic salary remuneration in
      lieu of notice.

15.2  The Chief Financial Officer agrees that the Company shall in the event of
      notice by the Chief Financial Officer be entitled in its absolute
      discretion to require the Chief Financial Officer not to attend at work
      and/or not to undertake all or any of his duties during any period of
      notice. However during the notice period the Chief Financial Officer will
      continue to be required to hold himself available to assist as may
      reasonably be required by the Company, for example, by answering any
      questions or dealing with other matters relating to the Chief Financial
      Officer's work. During the notice period the Company shall

                                       5


                                                                    CONFIDENTIAL

      continue to pay the Chief Financial Officer's basic salary and any
      relevant contractual benefits. The Chief Financial Officer will not be
      entitled to take up new employment until such time as the Chief Financial
      Officer's term of employment with the Company expires or terminates, in
      accordance with this agreement, unless otherwise mutually agreed in
      writing.

15.3  Where the Chief Financial Officer is incapacitated through accident, or
      ill health or otherwise from attending to his duties under the terms of
      this Agreement for a period of six (6) consecutive calendar months or
      more, the Company shall be entitled to terminate this Agreement by giving
      notice of termination (or pay in lieu of notice as aforesaid) in
      accordance with the provisions of this Agreement.

15.3  SUMMARY TERMINATION

      The Company may without notice and without any payment in lieu of notice
      terminate this Agreement with immediate effect if the Chief Financial
      Officer:

            15.3.1  is in serious default or wilful neglect of his duties under
                    this Agreement or commits any serious breach or
                    non-observance or continues (after warning) to commit
                    repeated breaches or non-observance of his obligations under
                    this Agreement, including (without limitation) material
                    failure after warnings to meet the performance levels set in
                    the scheme under the provisions of this Agreement or of any
                    rules and regulations made by the Company;

            15.3.2  commits any act of gross misconduct or serious default or is
                    guilty of any conduct which in the reasonable opinion of the
                    Company brings him, the Company or any of the Companies into
                    disrepute or affects the business of the Company;

            15.3.3  becomes bankrupt or makes any arrangement or composition
                    with his creditors generally; or

            15.3.4  is convicted of any criminal offence other than an offence,
                    under the Road Traffic Acts for which a penalty of
                    imprisonment is not imposed, and which in the reasonable
                    opinion of the Company does not affect his position as Chief
                    Financial Officer's of the Company.

      The Company shall be entitled to suspend the Chief Financial Officer with
      full pay pending the expeditious investigation of any of the matters
      referred to in this Clause.

16.   RECONSTRUCTION OR AMALGAMATION

      If before the expiry of the fixed term of this Agreement, or the expiry of
      any renewed term, the employment of the Chief Financial Officer hereunder
      shall terminate by reason of the liquidation of the Company for the
      purpose of reconstruction or amalgamation, or as part of any arrangement
      for the amalgamation or re-structuring of the undertaking of the Company
      not involving liquidation, the Chief Financial Officer shall be offered a
      suitable alternative position with the amalgamating or reconstructed
      Company for a period of not less than the then unexpired term of this
      Agreement, or the expiry of any renewed term, and on terms not less
      favourable than the terms and conditions of employment then applying.

                                       6


                                                                    CONFIDENTIAL

17.   OBLIGATIONS FOLLOWING TERMINATION OF EMPLOYMENT

17.1  The Chief Financial Officer is likely to obtain, in the course of his
employment, confidential information and personal knowledge of and influence
over persons interacting with the Company. Therefore, the Chief Financial
Officer hereby agrees and covenants with the Company and without prejudice to
other restrictions imposed upon the Chief Financial Officer by law:

            17.1.1. that the Chief Financial Officer will not during the period
                    of six (6) months from the date on which his employment
                    terminates with the Company canvass or solicit or endeavour
                    to canvass or solicit (whether on his own account or for any
                    other person, company, firm or organisation) in competition
                    with the Company or with its Affiliates ("Affiliates"
                    defined as a party that directly or indirectly controls, or
                    is controlled by, or is under common control, with the party
                    specified) in the field of biotechnolgy or pharmaceutical
                    products, for the custom of any person, firm, company or
                    organisation who at any time during the last twelve (12)
                    months of his service with the Company was a customer of, or
                    in the habit of dealing with, the Company or its Affiliates
                    in the field of biotechnology and pharmaceutical products
                    for and with whom the Chief Financial Officer shall have
                    been personally involved;

            17.1.2. that the Chief Financial Officer will not during the period
                    of six (6) months from the date on which his employment
                    terminates with the Company either on his own behalf or for
                    any other person, company, firm or organisation, be employed
                    or engaged however with any person, business, organisation,
                    firm or company that competes with the Company or its
                    Affiliates in the field of biotechnology or pharmaceutical
                    products, in all or any of the Republic of Ireland, Northern
                    Ireland, England, Scotland or Wales;

            17.1.3. that the Chief Financial Officer will not during the period
                    of one (1) year from the date on which his employment
                    terminates with the Company either on his own behalf or for
                    any other person, company, firm or organisation solicit or
                    endeavour to entice away from the Company or its Affiliates
                    any person who was, to the Chief Financial Officer's
                    knowledge, at any time during the last twelve (12) months of
                    his service with the Company, a director, officer, manager,
                    employee or associate of such company who has specialised or
                    significant knowledge and skill and with whom the Chief
                    Financial Officer had dealings during the course of his
                    employment with the Company.

17.2. While the restrictions imposed in this Clause are considered by the
parties to be reasonable in all the circumstances, it is agreed that each of the
foregoing restrictions are separate and severable so that if any one or more of
such restrictions shall either taken by itself or themselves together be
adjudged by a court of competent jurisdiction to go beyond what is reasonable in
all the circumstances for the protection of the Company's legitimate interests,
but would be adjudged reasonable if any particular restriction or restrictions
were deleted or if any part or parts of the wording thereof were deleted,
restricted or limited in a particular manner then the said restrictions shall
apply with such deletions, restrictions or limitations as the case may be.

                                       7


                                                                    CONFIDENTIAL

18    NOTICE

18.1. Any notice or other communication given or made under this Agreement shall
be in writing and may be delivered to the relevant party or sent by pre-paid
registered post to the address of that party specified in this Agreement or such
other address as may be notified hereunder by that party from time to time for
this purpose and will be effective notwithstanding any change of address not so
notified.

18.2. Unless the contrary is proved, each such notice or communication will be
deemed to have been given or made and delivered (if by post) forty-eight (48)
hours after posting or (if by delivery) when left at the relevant address.

19.   MISCELLANEOUS

19.1. Headings are inserted for convenience only and do not affect the
      construction of this Agreement.

19.2. Words importing the singular include the plural and vice versa and words
      importing persons include corporations.

19.3. This Agreement supersedes all prior representations, arrangements,
      understandings and agreements between the parties hereto relating to the
      subject-matter hereof, and sets forth the entire, complete and exclusive
      agreement and understanding between the parties relating to the subject
      matter hereof, being a contract for a Chief Financial Officer of the
      Company. No party has relied on any representation, arrangement,
      understanding or agreement (whether written or oral) not expressly set out
      or referred to in this Agreement.

19.4. The references in this Agreement to an Act of Oireachtas shall be deemed
to include any statutory modification or re-enactment whenever made.

19.5. The expiration or the termination of this Agreement howsoever arising
shall not operate to effect such of the provisions hereof as, in accordance with
the terms thereof, are expressed to operate or have effect thereafter.

19.6.   This Agreement will be governed by and construed in accordance with the
laws of Ireland, including its rules as to the conflict of laws and is subject
to the exclusive jurisdiction of the Courts of the Republic of Ireland.

                                       8


                                                                    CONFIDENTIAL

IN WITNESS whereof this Agreement has been entered into the day and year first
herein written:

Signed on behalf of the Company
in the presence of Peter Thornton


Signature    /s/ Garo Armen
             -----------------------

Title        Chairman and CEO



Signed by the Chief Financial Officer
in the presence of Garo Armen

Signature    /s/ P. Thornton
             -----------------------

Title        Chief Financial Officer

                                       9


                                                                    CONFIDENTIAL

                                   SCHEDULE 1

1.    Employment Agreement

                                       10

                                                                   CONFIDENTIAL

                                    AGREEMENT

      AGREEMENT made and entered into in New York, New York, by and between
Antigenics, Inc. (the "Company"), a Delaware corporation with a principal place
of business at 630 Fifth Ave. Suite 2100 New York, NY, and Peter Thornton of
Dublin, Ireland (the "Executive"), effective as of the 21st day of June, 2004
(the "Agreement").

      WHEREAS, the operations of the Company and its Affiliates are a complex
matter requiring direction and leadership in a variety of arenas;

      WHEREAS, the Executive is possessed of certain experience and expertise
that qualify him to provide the direction and leadership required by the
Company;

      WHEREAS, the Executive is serving as the Senior Vice President and Chief
Financial Officer of Antigenics Therapeutics Ltd, a wholly owned subsidiary of
the Company, as per that certain agreement of even date herewith and, in such
capacity, has responsibilities that would generally be associated with the role
of Chief Financial Officer of the Company; and

      WHEREAS, subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Senior Vice President &
Chief Financial Officer and the Executive wishes to accept such employment;

      NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, terms, provisions and conditions set forth in this Agreement, the
parties hereby agree:

      1.    Employment. Subject to the terms and conditions set forth in this
Agreement, the Company hereby offers and the Executive hereby accepts employment
commencing on 12:00 am (Eastern Standard Time) on the day after the Executive is
granted the work authorization Visa H1-B, or such later date as the Company and
the Executive may agree in writing (the "Start Date").

      2.    Term. Subject to earlier termination as hereafter provided, this
Agreement shall have an original term of one year commencing on the effective
date hereof and shall be automatically extended thereafter for successive terms
of one year each, unless either party provides notice to the other at least
ninety (90) days prior to the expiration of the original or any extension term
that the Agreement is not to be extended. The term of this Agreement, as from
time to time extended or renewed, is hereafter referred to as "the term of this
Agreement" or "the term hereof".

      3.    Capacity and Performance.

            (a)   Commencing on the Start Date and continuing thereafter during
the term hereof, the Executive shall serve the Company as its Senior Vice
President & Chief Financial Officer and shall report to the Chief Executive
Officer. In addition, and without further compensation, the Executive shall
serve as a director and/or officer of one or more of the Company's Affiliates if
so elected or appointed from time to time.



            (b)   Commencing on the Start Date and continuing thereafter during
the term hereof, the Executive shall be employed by the Company on a full-time
basis and shall perform such duties and responsibilities on behalf of the
Company and its Affiliates as may be designated from time to time consistent
with his position as Senior Vice President & Chief Financial Officer.

            (c)   Commencing on the Start Date and continuing thereafter during
the term hereof, the Executive shall devote his best efforts, business judgment,
skill and knowledge to the advancement of the business and interests of the
Company and its Affiliates and to the discharge of his duties and
responsibilities hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental or academic
position during the term of this Agreement, except as may be approved by the
Board of Directors of the Company (the "Board") or its designee.

      4.    Compensation and Benefits. As compensation for all services
performed by the Executive commencing on the Start Date and continuing
thereafter under and during the term hereof and subject to performance of the
Executive's duties and of the obligations of the Executive to the Company and
its Affiliates, pursuant to this Agreement or otherwise:

            (a)   Base Salary. Commencing on the Start Date and continuing
thereafter during the term hereof, the Company shall pay the Executive a minimum
base salary at the rate of Two Hundred and Fifty Thousand Dollars ($250,000
United States dollars) per annum, payable in accordance with the payroll
practices of the Company for its executives and subject to increase by the
Board, in its sole discretion. Such base salary, as from time to time increased,
is hereafter referred to as the "Base Salary". The Board shall review the Base
Salary no less than annually.

            (b)   Incentive and Bonus Compensation. Commencing on the Start Date
and continuing thereafter during the term hereof, the Executive shall be
entitled to participate in the Company's Executive Incentive Plan, in accordance
with the terms thereof, as such terms may be modified or amended by the Company
from time to time; provided, however, that nothing contained herein shall
obligate the Company to continue such incentive compensation program. The
Executive's target incentive bonus under the Executive Incentive Plan is 40% of
his Base Salary. Such target may be modified by the Company from time to time,
in its sole discretion. Any compensation paid to the Executive under the
Executive Incentive Plan shall be in addition to the Base Salary. The Company
will provide the Executive with notice of any modifications or amendments to the
Executive Incentive Plan that materially affect his incentive compensation.

            (c)   Stock Options. Upon Executive's commencement of employment
pursuant to Section 1 hereunder, Executive shall be granted an option to
purchase 125,000 shares of common stock of the Company (the "Option Grant"). At
the discretion of the Compensation Committee of the Board, the Executive may be
granted additional options to purchase shares of stock of the Company in the
future. Any such grants, including without limitation the Option Grant, shall be
governed by the terms of the applicable Company stock option plan, as amended
from time to time, and any stock option certificate, stock option agreement, and
other restrictions generally applicable to Company stock options.

                                      -2-


            (d)   Vacations. Commencing on the Start Date and continuing
thereafter during the term hereof, the Executive shall be entitled to four (4)
weeks of vacation per annum, to be taken at such times and intervals as shall be
determined by the Executive, subject to the reasonable business needs of the
Company.

            (e)   Other Benefits. Commencing on the Start Date and continuing
thereafter during the term hereof and subject to any contribution therefor
generally required of executives of the Company, the Executive shall be entitled
to participate in any and all employee benefit plans from time to time in effect
for executives of the Company generally, except to the extent such plans are in
a category of benefit otherwise provided to the Executive. Such participation
shall be subject to (i) the terms of the applicable plan documents, (ii)
generally applicable Company policies and (iii) the discretion of the Board or
any administrative or other committee provided for in or contemplated by such
plan. The Company may alter, modify, add to or delete its employee benefit plans
at any time as it, in its sole judgment, determines to be appropriate, without
recourse by the Executive.

            (f)   Business Expenses. Commencing on the Start Date and continuing
thereafter during the term hereof, the Company shall pay or reimburse the
Executive for all reasonable, customary and necessary business expenses incurred
or paid by the Executive in the performance of his duties and responsibilities
hereunder, subject to any maximum annual limit and other restrictions on such
expenses as set forth in the Company's Travel Policy as may be amended from time
to time, and to such reasonable substantiation and documentation as may be
specified by the Company from time to time.

            (g)   Sign-On Bonus. Upon Executive's commencement of employment
pursuant to Section 1 hereunder, the Company shall pay the Executive a sign-on
bonus of Fifty Thousand Dollars ($50,000 United States dollars). In the event
that the Executive terminates his employment for any reason within nine (9)
months of the Start Date, the Executive shall repay to the Company the entire
sign-on bonus and agrees that such repayment may be set off against any money
owed to the Executive at the time his employment terminates.

      5.    Termination of Employment and Severance Benefits. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term under the following circumstances:

            (a)   Death. In the event of the Executive's death during the term
hereof, the Executive's employment hereunder shall immediately and automatically
terminate. In the event of the Executive's death after the Start Date and during
the term hereof, the Company shall pay to the Executive's designated beneficiary
or, if no beneficiary has been designated by the Executive, to his estate, any
earned and unpaid Base Salary and accrued but unused vacation through the date
of his death.

            (b)   Disability.

                  (i)   The Company may terminate the Executive's employment
      hereunder, upon notice to the Executive, in the event that the Executive
      becomes disabled

                                      -3-


      during his employment hereunder through any illness, injury, accident or
      condition of either a physical or psychological nature and, as a result,
      is unable to perform substantially all of his duties and responsibilities
      hereunder, with a reasonable accommodation, for ninety (90) days during
      any period of three hundred and sixty-five (365) consecutive calendar
      days.

                  (ii)  The Board may designate another employee to act in the
      Executive's place during any period of the Executive's disability.
      Notwithstanding any such designation, the Executive shall continue to
      receive the Base Salary in accordance with Section 4.a and benefits in
      accordance with Section 4.e, to the extent permitted by the then-current
      terms of the applicable benefit plans, until the Executive becomes
      eligible for disability income benefits under the Company's disability
      income plan or until the termination of his employment, whichever shall
      first occur.

                  (iii) While receiving disability income payments under the
      Company's disability income plan, the Executive shall not be entitled to
      receive any Base Salary under Section 4.a hereof, but shall continue to
      participate in Company benefit plans in accordance with Section 4.e and
      the terms of such plans, until the termination of his employment.

                  (iv)  If any question shall arise as to whether during any
      period commencing on the Start Date and continuing thereafter during the
      term hereof, the Executive is disabled through any illness, injury,
      accident or condition of either a physical or psychological nature so as
      to be unable to perform substantially all of his duties and
      responsibilities hereunder, the Executive may, and at the request of the
      Company shall, submit to a medical examination by a physician selected by
      the Company to whom the Executive or his duly appointed guardian, if any,
      has no reasonable objection to determine whether the Executive is so
      disabled and such determination shall for the purposes of this Agreement
      be conclusive of the issue. If such question shall arise and the Executive
      shall fail to submit to such medical examination, the Company's
      determination of the issue shall be binding on the Executive.

                  (v)   In the event the Company terminates the Executive's
      employment hereunder due to disability, the Company shall pay to the
      Executive any accrued and unpaid Base Salary and accrued but unused
      vacation through the date of termination and shall also provide the
      Relocation Benefit (as hereafter defined).

            (c)   By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause at any time upon fourteen (14) day
notice to the Executive setting forth in reasonable detail the nature of such
Cause. The following, as determined by the Company in its reasonable judgment,
shall constitute Cause for termination:

                  (i)   The Executive's material failure to perform (other than
      by reason of disability), or material negligence in the performance of,
      his duties and responsibilities to the Company or any of its Affiliates,
      which failure or neglect, if susceptible to cure,

                                      -4-


      remains uncured or continues to recur after notice from the Company
      specifying in reasonable detail the nature of such failure or neglect; or

                  (ii)  Material breach by the Executive of any provision of
      this Agreement; or

                  (iii) Other conduct by the Executive that is materially
      harmful to the business, interests or reputation of the Company or any of
      its Affiliates.

      Upon the giving of notice of termination of the Executive's employment
hereunder for Cause, the Company shall have no further obligation or liability
to the Executive, other than for Base Salary earned and unpaid and accrued
vacation earned but not taken at the date of termination.

            (d)   By the Company Other than for Cause. The Company may terminate
the Executive's employment hereunder other than for Cause at any time upon
notice to the Executive. In the event of such termination after the Start Date,
the Company shall pay the Executive the higher of (i) benefits payable under an
executive severance plan, if such a plan is in place on the date of termination
and if the Executive is eligible for such benefits under such a plan or (ii)
continue to pay the Executive his Base Salary, at the rate in effect on the date
of termination, until the conclusion of a period of twelve (12) months following
the date of termination. In addition, until the conclusion of a period of twelve
(12) months following the date of termination (if such termination is after the
Start Date), the Company shall (A) continue to make payments to the Executive
under the Executive Incentive Plan; and, (B) pay the full premium cost of the
Executive's participation in the Company's group medical and dental insurance
plans, provided that the Executive is entitled to continue such participation
under applicable law and plan terms. The payment(s) described in subparagraph
(A) shall be equal to the higher of (x) the Executive's target incentive bonus
or (y) the actual incentive bonus paid to the Executive, if any, under the
Executive Incentive Plan for the last full fiscal year preceding the year in
which the Executive's employment is terminated, and shall be pro-rated for any
period less than a full year. The Company will also provide the Executive with
outplacement assistance through a firm of its choice at a cost not to exceed
$15,000.00. In addition, if within twelve (12) months following such
termination, the Executive relocates from the State of New York back to Ireland,
the Company shall pay for all reasonable relocation expenses, as determined by
the Company, associated with such relocation (the "Relocation Benefit").
Furthermore, at the sole discretion of the Compensation Committee of the Board,
any unvested options to purchase Company stock may be accelerated.

            (e)   By the Executive for Good Reason. The Executive may terminate
his employment hereunder for Good Reason, upon notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by the Executive:

                  (i)   Failure of the Company to continue the Executive in the
      position of Senior Vice President & Chief Financial Officer; or

                                      -5-


                  (ii)  Material and substantial diminution in the nature or
      scope of the Executive's responsibilities, duties or authority; however,
      the Company's failure to continue the Executive's appointment or election
      as a director or officer of any of its Affiliates and any diminution of
      the business of the Company or any of its Affiliates, including without
      limitation the sale or transfer of any or all of the assets of the Company
      or any of its Affiliates, shall not constitute "Good Reason"; or

                  (iii) Material reduction in Base Salary or benefits due in
      accordance with the terms of this Agreement.

In the event of termination in accordance with this Section 5.e after the Start
Date, the Company shall pay the Executive the higher of (i) benefits payable
under an executive severance plan, if such a plan is in place on the date of
termination and if the Executive is eligible for such benefits under such a plan
or (ii) continue to pay the Executive his Base Salary, at the rate in effect on
the date of termination, until the conclusion of a period of twelve (12) months
following the date of termination. In addition, until the conclusion of a period
of twelve (12) months following the date of termination, the Company shall (A)
continue to make payments to the Executive under the Executive Incentive Plan;
and, (B) pay the full premium cost of the Executive's participation in the
Company's group medical and dental insurance plans, provided that the Executive
is entitled to continue such participation under applicable law and plan terms.
The payment(s) described in subparagraph (A) above shall be equal to the higher
of (x) the Executive's target incentive bonus or (y) the actual incentive bonus
paid to the Executive, if any, under the Executive Incentive Plan for the last
full fiscal year preceding the year in which the Executive's employment is
terminated, and shall be pro-rated for any period less than a full year. The
Company will also provide the Executive with outplacement assistance through a
firm of its choice at a cost not to exceed $15,000.00 and will provide the
Relocation Benefit. In addition, at the sole discretion of the Compensation
Committee of the Board, any unvested options to purchase Company stock may be
accelerated.

            (f)   By the Executive Other than for Good Reason. The Executive may
terminate his employment hereunder at any time upon sixty (60) days' notice to
the Company, unless such termination would violate any obligation of the
Executive to the Company under a separate severance agreement. In the event of
termination of the Executive pursuant to this Section 5.f after the Start Date,
the Board may elect to waive the period of notice, or any portion thereof, and,
if the Board so elects, the Company will pay the Executive his Base Salary for
the notice period (or for any remaining portion of the period).

            (g)   Upon a Change of Control.

                  (i)   If a Change of Control occurs, on the date of such
      Change in Control, fifty-percent (50%) of any outstanding unvested stock
      options granted to the Executive as of that date shall become vested and
      exercisable, provided that the Executive is employed by the Company on the
      date of such Change in Control.

                  (ii)  If a Change of Control occurs after the Start Date and,
      within eighteen (18) months following such Change of Control, the Company
      terminates the

                                      -6-


      Executive's employment other than for Cause, or the Executive terminates
      his employment for Good Reason, then, in lieu of any payments to or on
      behalf of the Executive under Section 5.d or 5.e hereof, the Company
      shall, until the conclusion of a period of eighteen (18) months following
      the date of termination: (A) continue to pay the Executive the Base Salary
      at the rate in effect on the date of termination; (B) continue to make
      payments to the Executive under the Executive Incentive Plan; and, (C) pay
      the full premium cost of the Executive's participation in the Company's
      group medical and dental insurance plans, provided that the Executive is
      entitled to continue such participation under applicable law and plan
      terms. The payment(s) described in subparagraph (B) above shall be equal
      to the higher of (x) the Executive's target incentive bonus or (y) the
      actual incentive bonus paid to the Executive, if any, under the Executive
      Incentive Plan for the last full fiscal year preceding the year in which
      the Executive's employment is terminated, and shall be pro-rated for any
      period less than a full year. The Executive may at his option request the
      Company to make any payments due under (A) or (B) in one-lump sum at date
      of termination. In addition, in the event the Change of Control occurs
      after the Start Date, any outstanding unvested options granted to the
      Executive as of the date of the Change in Control shall become vested and
      shall be exercisable for ninety (90) days following termination of the
      Executive's employment, and the Company will provide the Executive with
      outplacement assistance through a firm of its choice at a cost not to
      exceed $15,000.00 and will provide the Relocation Benefit. For the purpose
      of this Section 5.g alone, in addition to the definition provided in
      Section 5.e, Good Reason shall also mean the relocation of the Executive's
      principal office, without his prior consent, to a location more than
      thirty (30) miles from its location on the day prior to the Change in
      Control.

                  (iii) All payments required to be made by the Company
      hereunder to Executive or his dependents, beneficiaries, or estate will be
      subject to the withholding of such amounts relating to tax and/or other
      payroll deductions as may be required by law.

                  In the event that it is determined that any payment or benefit
      provided by the Company to or for the benefit of Executive, either under
      this Agreement or otherwise, will be subject to the excise tax imposed by
      Section 4999 of the Internal Revenue Code or any successor provision(s)
      ("Section 4999"), the Company will, prior to the date on which any amount
      of the excise tax must be paid or withheld, make an additional lump-sum
      payment (the "Gross-up Payment") to Executive in an amount sufficient,
      after giving effect to all federal, state and other taxes and charges
      (including interest and penalties, if any) with respect to the gross-up
      payment, to make Executive whole for all taxes (including withholding
      taxes) and any associated interest and penalties, imposed under or as a
      result of Section 4999.

                  Determinations under this Section 5.g.iii will be made by an
      accounting firm engaged by the Company (the "Firm"). The determinations of
      the Firm will be binding upon the Company and Executive except as the
      determinations are established in resolution (including by settlement) of
      a controversy with the Internal Revenue Service to have been incorrect.
      All fees and expenses of the Firm will be paid by the Company.

                                      -7-


                  If the Internal Revenue Service asserts a claim that, if
      successful, would require the Company to make a Gross-up Payment or an
      additional Gross-up Payment, the Company and Executive will cooperate
      fully in resolving the controversy with the Internal Revenue Service. The
      Company will make or advance such Gross-up Payments as are necessary to
      prevent Executive from having to bear the cost of payments made to the
      Internal Revenue Service in the course of, or as a result of, the
      controversy. The Firm will determine the amount of such Gross-up Payments
      or advances and will determine after final resolution of the controversy
      whether any advances must be returned by Executive to the Company. The
      Company will bear all expenses of the controversy and will gross Executive
      up for any additional taxes that may be imposed upon Executive as a result
      of its payment of such expenses.

            (iv)  For the purpose of this Section 5.g, a "Change in Control"
      shall mean: (A) the acquisition by any Organization of beneficial
      ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
      Act) of 50% or more of the common stock of the Company; provided, however,
      that for purposes of this subsection (A), an acquisition shall not
      constitute a Change in Control if it is: (x) by a Benefit Plan sponsored
      or maintained by the Company or an entity controlled by the Company or (y)
      by an entity pursuant to a transaction that complies with clauses (x), (y)
      and (z) of subsection (C) of this Section 5(g)(iv); or (B) individuals
      who, as of May 1, 2004, constitute the Board (the "Incumbent Board") cease
      for any reason to constitute at least a majority of the Board; provided,
      however, that any individual becoming a director subsequent to May 1, 2004
      whose election, or nomination for election by the Company's stockholders,
      was approved by a vote of at least a majority of the directors then
      comprising the Incumbent Board (or a majority of the members of a
      nominating committee who are members of the Incumbent Board) shall be
      treated as a member of the Incumbent Board unless he or she assumed office
      as a result of an actual or threatened election contest with respect to
      the election or removal of directors or other actual or threatened
      solicitation of proxies or consents by or on behalf of an Organization
      other than the Board; or (C) consummation of a merger or consolidation
      involving the Company, or a sale or other disposition of all or
      substantially all of the assets of the Company, (a "transaction") in each
      case unless, immediately following such transaction, (x) the beneficial
      owners of the common stock of the Company outstanding immediately prior to
      such transaction beneficially own, directly or indirectly, more than 50%
      of the combined voting power of the outstanding voting securities of the
      entity resulting from such transaction (including, without limitation, an
      entity which as a result of such transaction owns the Company or all or
      substantially all of the Company's assets either directly or through one
      or more subsidiaries), (y) no Organization (excluding any entity resulting
      from such transaction or any Benefit Plan of the Company or such entity
      resulting from such transaction) beneficially owns, directly or
      indirectly, 50% or more of the combined voting power of the then
      outstanding voting securities of such entity and (z) at least a majority
      of the members of the board of directors or similar board of the entity
      resulting from such transaction were members of the Incumbent Board at the
      time of the execution of the initial agreement, or of the action of the
      Board, providing for such transaction; or (D) approval by the stockholders
      of the Company of a complete liquidation or dissolution of the Company.
      For purposes of the foregoing: "Benefit Plan" means any employee benefit
      plan, including any related trust;

                                      -8-


      "Board" means the Board of Directors of the Company; "Exchange Act" means
      the Securities Exchange Act of 1934, as amended; and "Organization" means
      any individual, entity or group (within the meaning of Section 13(d)(3) or
      Section 14(d)(2) of the Exchange Act).

            (h)   Effect of Failure to Renew by Company. In the event the
Company chooses not to renew the term hereof, such failure to renew shall be
treated as a termination by the Company other than for "Cause" unless the
Company gives notice that the failure to renew is for "Cause" as defined in
Section 5.c.

      6.    Effect of Termination. The provisions of this Section 6 shall apply
to termination due to the expiration of the term, termination pursuant to
Section 5 or otherwise.

            (a)   Payment(s) by the Company and contributions to the cost of the
Executive's continued participation in the Company's group health and dental
plans that may be due the Executive in each case under the applicable
termination provision of Section 5 shall constitute the entire obligation of the
Company to the Executive. In order to receive any payments, benefits
continuation, accelerated vesting of stock options or any other benefits under
Section 5.b or 5.d or 5.e or 5.g or 5.h, the Executive must first execute a
General Release of Claims in a form acceptable to the Company.

            (b)   Except for medical and dental insurance coverage continued
pursuant to Section 5.d or 5.e or 5.g or 5.h hereof, benefits shall terminate
pursuant to the terms of the applicable benefit plans based on the date of
termination of the Executive's employment without regard to any continuation of
Base Salary or other payment to the Executive following such date of
termination.

            (c)   Provisions of this Agreement shall survive any termination if
so provided herein or if necessary or desirable fully to accomplish the purposes
of such provision, including without limitation the obligations of the Executive
under Sections 7, 8 and 9 hereof. The obligation of the Company to make payments
to or on behalf of the Executive under Section 5.d or 5.e or 5.g or 5.h hereof
is expressly conditioned upon the Executive's continued full performance of
obligations under Sections 7, 8 and 9 hereof. The Executive recognizes that,
except as expressly provided in Section 5.d or 5.e or 5.g or 5.h, no
compensation is earned after termination of employment.

      7.    Confidential Information.

            (a)   The Executive acknowledges that the Company and its Affiliates
continually develop Confidential Information, that the Executive may develop
Confidential Information for the Company or its Affiliates and that the
Executive may learn of Confidential Information during the course of employment.
The Executive will comply with the policies and procedures of the Company and
its Affiliates for protecting Confidential Information and shall never disclose
to any Person or to any governmental agency or political subdivision of any
government (except as required by applicable law or for the proper performance
of his duties and responsibilities to the Company and its Affiliates), or use
for his own benefit or gain, any

                                      -9-


Confidential Information obtained by the Executive incident to his employment or
other association with the Company or any of its Affiliates. The Executive
understands that this restriction shall continue to apply after his employment
terminates, regardless of the reason for such termination.

            (b)   All documents, records, tapes and other media of every kind
and description relating to the business, present or otherwise, of the Company
or its Affiliates and any copies, in whole or in part, thereof (the
"Documents"), whether or not prepared by the Executive, shall be the sole and
exclusive property of the Company and its Affiliates. The Executive shall
safeguard all Documents and shall surrender to the Company at the time his
employment terminates, or at such earlier time or times as the Board or its
designee may specify, all Documents then in the Executive's possession or
control.

      8.    Restricted Activities. The Executive agrees that some restrictions
on his activities during and after his employment are necessary to protect the
goodwill, Confidential Information and other legitimate interests of the Company
and its Affiliates:

            (a)   Commencing on the effective date of this Agreement and
continuing for the greater of (i) twelve (12) months after his employment with
the Company terminates (or in the event that said employment does not commence,
then 12 months after his employment with Antigenics Therapeutics Ltd.
terminates) or (ii) the period during which the Executive is receiving payments
under Section 5.d or 5.e or 5.g or 5.h (the "Non-Competition Period"), the
Executive shall not, directly or indirectly, whether as owner, partner,
investor, consultant, agent, employee, co-venturer or otherwise, compete with
the Company or any of its Affiliates or undertake any planning for any business
competitive with the Company or any of its Affiliates. Specifically, but without
limiting the foregoing, the Executive agrees not to engage in any manner in any
activity that is directly or indirectly competitive with the business of the
Company or any of its Affiliates as conducted or under consideration at any time
during the Executive's employment. For the purposes of this Section 8, the
business of the Company and its Affiliates shall include all Products and the
Executive's undertaking shall encompass all items, products and services that
may be used in substitution for Products. The foregoing shall not prohibit the
Executive's passive ownership of two percent (2%) or less of the equity
securities of any publicly traded company.

            (b)   The Executive agrees that, during his employment with the
Company or any Affiliate of the Company, he will not undertake any outside
activity, whether or not competitive with the business of the Company or its
Affiliates, that could reasonably give rise to a conflict of interest or
otherwise interfere with his duties and obligations to the Company or any of its
Affiliates.

            (c)   The Executive further agrees that while he is employed by the
Company or any Affiliate of the Company and thereafter during the remainder of
the Non-Competition Period, the Executive will not solicit for the purpose of
hiring or direct or encourage anyone else to solicit for the purpose of hiring
any employee of the Company or any of its Affiliates, directly assist in such
hiring by any Person, or solicit or encourage any customer or vendor of the
Company or any of its Affiliates to terminate its relationship with them, or, in
the case of a

                                      -10-


customer, to conduct with any Person any business or activity which such
customer conducts or could conduct with the Company or any of its Affiliates.

      9.    Assignment of Rights to Intellectual Property. The Executive shall
promptly and fully disclose, if he has not done so already, all Intellectual
Property to the Company. The Executive hereby assigns and agrees to assign to
the Company (or as otherwise directed by the Company) the Executive's full
right, title and interest in and to all Intellectual Property. The Executive
agrees to execute any and all applications for domestic and foreign patents,
copyrights or other proprietary rights and to do such other acts (including
without limitation the execution and delivery of instruments of further
assurance or confirmation) requested by the Company to assign the Intellectual
Property to the Company and to permit the Company to enforce any patents,
copyrights or other proprietary rights to the Intellectual Property. The
Executive will not charge the Company for time spent in complying with these
obligations; provided, however, that after the Executive's employment
terminates, the Company will reimburse the Executive for reasonable expenses
incurred in complying with his obligations under this Section 9. All
copyrightable works that the Executive creates shall be considered "work made
for hire". After the Executive's employment terminates, he shall not be required
to devote more than forty (40) hours per calendar year to support the Company in
any activities required under this Section 9.

                                      -11-


      10.   Notification Requirement. Until the conclusion of the term of this
Agreement, the Executive shall give notice to the Company of each new business
activity he plans to undertake, at least twenty-one (21) days prior to beginning
any such activity. During the time period between the conclusion of the term of
this Agreement and the Non-Competition Period, the Executive shall give notice
to the Company of each new potentially competitive business activity he plans to
undertake. Such notice shall state the name and address of the Person for whom
such activity is undertaken and the nature of the Executive's business
relationship(s) and position(s) with such Person. Provided that doing so would
not violate any contractual commitment of the Executive, the Executive shall
provide the Company with such other pertinent information concerning such
business activity as the Company may reasonably request in order to determine
the Executive's continued compliance with his obligations under Sections 7, 8
and 9 hereof.

      11.   Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 7 and 8 hereof.
The Executive agrees that said restraints are necessary for the reasonable and
proper protection of the Company and its Affiliates and that each and every one
of the restraints is reasonable in respect to subject matter, length of time and
geographic area. The Executive further acknowledges that, were he to breach any
of the covenants contained in Sections 7 or 8 hereof, the damage to the Company
would be irreparable. The Executive therefore agrees that the Company, in
addition to any other remedies available to it, shall be entitled to preliminary
and permanent injunctive relief against any breach or threatened breach by the
Executive of any of said covenants, without having to post bond. The parties
further agree that, in the event that any provision of Section 7 or 8 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its being extended over too great a time, too large a geographic
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.

      12.   Conflicting Agreements. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which
the Executive is a party or is bound and that the Executive is not now subject
to any covenants against competition or similar covenants that would affect the
performance of his obligations hereunder. The Executive will not disclose to or
use on behalf of the Company any proprietary information of a third party
without such party's consent.

      13.   Indemnification. The Company shall indemnify the Executive to the
extent provided in its then current Articles or By-Laws. The Executive agrees to
promptly notify the Company of any actual or threatened claim arising out of or
as a result of his employment with the Company.

      14.   Definitions. Words or phrases which are initially capitalized or are
within quotation marks shall have the meanings provided in this Section 14 and
as provided elsewhere herein. For purposes of this Agreement, the following
definitions apply:

            (a)   "Affiliates" means all persons and entities directly or
indirectly

                                      -12-


controlling, controlled by or under common control with the Company, where
control may be by either management authority or equity interest.

            (b)   "Confidential Information" means any and all information of
the Company and its Affiliates that is not generally known by others.
Confidential Information includes without limitation such information relating
to (i) the development, research, testing, manufacturing, marketing and
financial activities of the Company and its Affiliates, (ii) the Products, (iii)
the costs, sources of supply, financial performance and strategic plans of the
Company and its Affiliates, (iv) the identity and special needs of the customers
of the Company and its Affiliates and (v) the people and organizations with whom
the Company and its Affiliates have business relationships and those
relationships. Confidential Information also includes comparable information
that the Company or any of its Affiliates have received belonging to others or
which was received by the Company or any of its Affiliates with any
understanding that it would not be disclosed. Confidential Information excludes
information which is in the public domain as of the Effective Date, or which
lawfully enters the public domain during the term of this Agreement through no
fault of the Executive or any other party with an obligation of confidentiality
with respect to such information.

            (c)   "Intellectual Property" means inventions, discoveries,
developments, methods, processes, compositions, works, concepts and ideas
(whether or not patentable or copyrightable or constituting trade secrets)
conceived, made, created, developed or reduced to practice by the Executive
(whether alone or with others, whether or not during normal business hours or on
or off Company premises) during the Executive's employment and during the period
of twelve (12) months immediately following termination of his/her employment
that relate to either the Products or any prospective activity of the Company or
any of its Affiliates.

            (d)   "Person" means an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization, other than
the Company or any of its Affiliates.

            (e)   "Products" mean all products planned, researched, developed,
under development, tested, manufactured, sold, licensed, leased or otherwise
distributed or put into use by the Company or any of its Affiliates, together
with all services provided or planned by the Company or any of its Affiliates,
during the Executive's employment.

      15.   Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.

      16.   Assignment. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter affect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person. This Agreement shall inure to the benefit of and be binding upon
the Company and the Executive,

                                      -13-


their respective successors, executors, administrators, heirs and permitted
assigns.

      17.   Severability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.

      18.   Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

      19.   Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known personal address on the books of the Company or, in the case of the
Company, at its principal place of business, attention of Associate General
Counsel, or to such other address as either party may specify by notice to the
other actually received.

      20.   Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment, excluding the relocation benefits provided to you as
described in the May 24, 2004 letter from John Cerio.

      21.   Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by an expressly authorized
representative of the Company.

      22.   Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.

      23.   Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.

      24.   Governing Law. This is a contract and shall be construed and
enforced under and be governed in all respects by the laws of the Commonwealth
of Massachusetts, without regard to the conflict of laws principles thereof.

                                      -14-


      IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Executive, as of the date first above written.


THE EXECUTIVE:                      ANTIGENICS INC.

/s/ P. Thornton                     By: /s/ Garo Armen
- -------------------------               -------------------------------

                                    Title: Chairman and CEO



                                      -15-

EX-31.1

                                                                    Exhibit 31.1

    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Garo H. Armen, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Antigenics Inc.;

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    I am responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
      the registrant and have:

       a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under my
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to me by others within those entities, particularly during the
            period in which this quarterly report is being prepared;

       b)   Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this quarterly report my conclusions
            about the effectiveness of the disclosure controls and procedures as
            of the end of the period covered by this quarterly report based on
            such evaluation; and

       c)   Disclosed in this quarterly report any change in the registrant's
            internal control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting: and

5.    I have disclosed, based on my most recent evaluation of internal control
      over financial reporting, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

       a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

       b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.



Date:   August 9, 2004                      /s/ Garo H. Armen
                                            ----------------------------------
                                            Garo H. Armen Ph.D., Chairman, and
                                            Chief Executive Officer
                                            (Principal Accounting Officer)

EX-32.1

                                                                    Exhibit 32.1


                                  Certification
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002


In connection with the Quarterly Report on Form 10-Q of Antigenics Inc. (the
"Company") for the quarterly period ended June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report") the
undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

      (i)   The Report fully complies with the requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (ii)  The information contained in the Report fairly presents, in all
            material respects, the financial condition and results of operations
            of the Company.


                                                        /s/ Garo H. Armen, Ph.D.
                                                        ------------------------
                                                            Garo H. Armen, Ph.D.
             Chairman and Chief Executive Officer (Principal Accounting Officer)


Date:  August 9, 2004

A signed original of this written statement required by Section 906 has been
provided to Antigenics Inc. and will be retained by Antigenics Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.